SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11c or Section 240.14a-12
Central Federal Corporation
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(Name of Registrant as Specified In Its Charter)
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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(LOGO)
601 Main Street Wellsville, Ohio 43968 (330) 666-7979
March 15, 2004
Fellow Shareholders:
You are cordially invited to attend the Annual Meeting of shareholders of
Central Federal Corporation which will be held at the Central Federal Bank
Fairlawn office located at 2923 Smith Road, Fairlawn, Ohio on Tuesday, April 20,
2004 at 10:00 a.m., local time.
The attached notice of the Annual Meeting and proxy statement describe the
formal business to be transacted at the Meeting. Directors and officers of the
Company, as well as a representative of Crowe Chizek and Company LLC, the
Company's independent auditors, will be present at the Meeting to respond to any
questions that shareholders may have regarding the business to be transacted. In
addition, the Meeting will include management's report on the Company's
financial performance for 2003.
The Board of Directors of Central Federal Corporation has determined that
matters to be considered at the Annual Meeting are in the best interests of the
Company and its shareholders, AND THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" THE NOMINEES AS DIRECTORS SPECIFIED UNDER PROPOSAL 1, "FOR" APPROVAL OF
THE AMENDED AND RESTATED 2003 EQUITY COMPENSATION PLAN AS SPECIFIED UNDER
PROPOSAL 2, AND "FOR" RATIFICATION OF THE APPOINTMENT OF CROWE CHIZEK AND
COMPANY LLC AS INDEPENDENT AUDITORS OF THE COMPANY FOR 2004 AS SPECIFIED UNDER
PROPOSAL 3.
Your vote is very important. Whether or not you expect to attend, please
read the enclosed proxy statement and then complete, sign and return the
enclosed proxy card promptly in the postage-paid envelope provided so that your
shares will be represented. If you attend the Meeting, you may vote in person
even if you have previously mailed a proxy card.
On behalf of the Board of Directors and all of the employees, thank you for
your continued interest and support.
Sincerely yours,
(/s/ David C. Vernon)
David C. Vernon
Chairman, President and Chief Executive Officer
CENTRAL FEDERAL CORPORATION
601 MAIN STREET
WELLSVILLE, OHIO 43968
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 20, 2004
NOTICE IS HEREBY GIVEN that the Annual Meeting of shareholders of Central
Federal Corporation will be held Tuesday, April 20, 2004 at the Central Federal
Bank Fairlawn office located at 2923 Smith Road, Fairlawn, Ohio at 10:00 a.m.,
local time.
The purpose of the Meeting is to consider and vote upon the following
matters:
1. The election of three Directors for terms of three years each; one
Director for a term of two years, and one Director for a term of one
year, or until their successors are elected and qualified;
2. The approval of the Amended and Restated 2003 Equity Compensation Plan;
3. The ratification of the appointment of Crowe Chizek and Company LLC as
independent auditors of the Company for the year ending December 31,
2004, and;
4. Such other matters as may properly come before the Meeting. The Board of
Directors is not aware of any other business to come before the Meeting.
Record holders of the common stock of Central Federal Corporation at the
close of business on February 27, 2004 are entitled to receive notice of the
Meeting and to vote at the Meeting and any adjournments or postponement of the
Meeting. The Meeting may be adjourned to permit the Company to solicit
additional proxies in the event that there are insufficient votes for a quorum
or to approve or ratify any of the aforementioned proposals at the time of the
Meeting. A list of shareholders entitled to vote will be available at the
Meeting and for the ten days preceding the Meeting at Central Federal Bank, 2841
Riviera Drive, Suite 300, Fairlawn, Ohio.
BY THE ORDER OF THE BOARD OF DIRECTORS
(/s/ Eloise L. Mackus)
Eloise L. Mackus
Corporate Secretary
Wellsville, Ohio
March 15, 2004
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE
OF FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.
CENTRAL FEDERAL CORPORATION
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
Your vote is very important. This proxy statement, proxy card and 2003
Annual Report are being sent on or about March 15, 2004, to shareholders of
Central Federal Corporation (the Company) in connection with the solicitation of
proxies by the Board of Directors for the Annual Meeting of Shareholders (the
Meeting). The Board of Directors encourages you to read this proxy statement
thoroughly and to take this opportunity to vote on the matters to be decided at
the Meeting.
VOTING PROCEDURES
WHO IS ENTITLED TO VOTE?
You are entitled to vote your common stock if the Company's records show
that you held your shares as of the close of business on February 27, 2004. As
of the close of business on that date, a total of 2,028,872 shares of common
stock were outstanding and entitled to vote. Each share of common stock is
entitled to one vote on each matter presented at the Meeting, except that, as
provided in the Company's Certificate of Incorporation, record holders of common
stock who beneficially own, either directly or indirectly, in excess of 10% of
the outstanding shares of common stock (the 10% limit) are not entitled to any
vote of their shares that are in excess of the 10% limit, and those shares are
not treated as outstanding for voting purposes.
A person or entity is deemed to beneficially own shares owned by an
affiliate of, as well as by persons acting in concert with, such person or
entity. The Company's Certificate of Incorporation authorizes the Board of
Directors (i) to make all determinations necessary to implement and apply the
10% limit, including determining whether persons or entities are acting in
concert and (ii) to demand that any person who is reasonably believed to
beneficially own stock in excess of the 10% limit supply information to the
Company to enable the Board of Directors to implement and apply the 10% limit.
HOW DO I VOTE?
Other than by attending the Meeting and voting in person, shareholders are
requested to vote by completing the enclosed proxy card and returning it signed
and dated in the enclosed postage-paid envelope. If you hold your shares through
a broker, bank or other nominee (i.e. in "street name"), you will receive
separate instructions from the nominee describing how to vote your shares.
WHAT ARE THE MATTERS TO BE PRESENTED?
There are three proposals that will be presented for your consideration at
the Meeting:
1) Election of five directors;
2) Approval of the Amended and Restated 2003 Equity Compensation Plan; and
3) Ratification of appointment of independent auditors for 2004.
WHAT ARE THE VOTING RECOMMENDATIONS OF THE BOARD OF DIRECTORS?
The Company's Board of Directors is sending you this proxy statement for
the purpose of requesting that you allow your shares of Company common stock to
be represented at the Meeting by persons named in the enclosed proxy card. All
shares of Company common stock represented at the Meeting by properly executed
proxies will be voted according to the instructions indicated on the proxy card.
If you sign and return a proxy card without giving voting instructions, your
shares will be voted as recommended by the Company's Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH NOMINEE TO THE BOARD OF
DIRECTORS, "FOR" APPROVAL OF THE AMENDED AND RESTATED 2003 EQUITY COMPENSATION
PLAN AND "FOR" RATIFICATION OF CROWE CHIZEK AND COMPANY LLC AS INDEPENDENT
AUDITORS.
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WHAT VOTE IS REQUIRED FOR EACH PROPOSAL?
In voting on the election of Directors (Proposal 1), you may vote in favor
of any or all the nominees or withhold authority to vote for the nominees.
Directors are elected by a plurality of the votes cast. This means that the
nominees receiving the greatest number of votes will be elected. Votes that are
withheld and broker non-votes will have no effect on the outcome of the
election.
In voting on the Amended and Restated 2003 Equity Compensation Plan
(Proposal 2), the ratification of Crowe Chizek and Company LLC as independent
auditors of the Company (Proposal 3) and all other matters that may properly
come before the Meeting, you may vote in favor of the proposal, vote against the
proposal or abstain from voting. Under the Company's Bylaws and Delaware law, an
affirmative vote of the holders of a majority of the votes cast at the Meeting
on Proposal 2 or Proposal 3 is required to constitute shareholder approval.
Shares underlying broker non-votes or in excess of the 10% limit will not be
counted as present and entitled to vote or as votes cast and will have no effect
on the vote. If there are not sufficient votes for a quorum or to approve or
ratify any proposal at the time of the Meeting, the Meeting may be adjourned in
order to permit the further solicitation of proxies.
The Company is not aware of any other matters to be presented at the
Meeting. If any matters not described in this proxy statement are properly
presented at the Meeting, the persons named in the proxy card will use their
best judgment to determine how to vote your shares. This includes a motion to
adjourn or postpone the Meeting in order to solicit additional proxies. If the
Meeting is postponed or adjourned, your Company common stock may be voted by the
persons named on the proxy card on the new Meeting date as well, unless you have
revoked your proxy.
WHAT CONSTITUTES A QUORUM FOR THE MEETING?
The Meeting will be held if a quorum, consisting of a majority of
outstanding shares of common stock entitled to vote (after subtracting any
shares in excess of the 10% limit) is represented at the Meeting. If you return
valid proxy instructions or attend the Meeting in person, your shares will be
counted for purposes of determining whether there is a quorum, even if you
abstain from voting. Broker non-votes also will be counted for purposes of
determining a quorum. A broker non-vote occurs when a broker, bank, or other
nominee holding shares for a beneficial owner does not vote on a particular
proposal because the nominee does not have discretionary voting power with
respect to the item and has not received voting instruction from the beneficial
owner.
CAN I REVOKE OR CHANGE MY VOTE AFTER I SUBMIT MY PROXY?
You may revoke your proxy at any time before the vote is taken at the
Meeting. To revoke your proxy, you must either advise the Corporate Secretary of
the Company in writing before your common stock has been voted at the Meeting,
deliver to the Company another proxy that bears a later date, or attend the
Meeting and vote your shares in person. Attendance at the Meeting will not in
itself revoke your proxy. If your Company common stock is held in street name
and you wish to change your voting instructions after you have returned your
voting instruction form to your broker or bank, you must contact your broker or
bank.
WHO WILL COUNT THE VOTE?
The Company's transfer agent, Registrar and Transfer Company, will tally
the vote, which will be certified by an independent Inspector of Election. The
Board of Directors has designated Richard Kloch of Crowe Chizek & Company LLC to
act as the inspector of election. Mr. Kloch is not otherwise employed by or a
director of the Company or any of its affiliates. After the final adjournment of
the Meeting, the proxies will be returned to the Company.
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WHO CAN ATTEND THE MEETING?
If you are a shareholder of record as of the close of business on February
27, 2004, you may attend the Meeting. However, if you are a beneficial owner of
Company common stock held by a broker, bank or other nominee, you will need
proof of ownership to be admitted to the Meeting. A recent brokerage statement,
or letter from a bank or broker would serve as proof of ownership. If you want
to vote your shares of Company common stock held in street name in person at the
Meeting, you will have to get a written proxy in your name from the broker,
bank, or other nominee who holds your shares.
CORPORATE GOVERNANCE
GENERAL
The Company continues to review its corporate governance policies and
practices. This includes comparing its current policies and practices to
policies and practices suggested by various groups or authorities active in
corporate governance and practices of other public companies. Based upon this
review, the Company expects to adopt any changes that the Board of Directors
believes are the best corporate governance policies and practices for the
Company. The Company will adopt changes, as appropriate, to comply with the
Sarbanes-Oxley Act of 2002 and any rule changes made by the Securities and
Exchange Commission and the Nasdaq Stock Market, Inc.
CODE OF BUSINESS CONDUCT AND ETHICS
Since the Company's inception in 1998, it has had a Code of Business
Conduct and Ethics (Code of Conduct). The Company requires all directors,
officers and other employees to adhere to the Code of Conduct in addressing the
legal and ethical issues encountered in conducting their work. The Code of
Conduct requires that the Company's employees avoid conflicts of interest,
comply with all laws and other legal requirements, conduct business in an honest
and ethical manner and otherwise act with integrity and in the Company's best
interest. During 2003 all of the Company's employees were required to certify
that they reviewed and understood the Code of Conduct. In addition, all officers
and senior level executives were required to certify as to any actual or
potential conflicts of interest involving them and the Company. The Company also
provides training for its employees on the Code of Conduct and their legal
obligations.
Employees are required to report any conduct that they believe in good
faith to be an actual or apparent violation of the Code of Conduct. The Code of
Conduct includes procedures to receive, retain and treat complaints received
regarding accounting, internal accounting controls or auditing matters and to
allow for the confidential and anonymous submission by employees of concerns
regarding questionable accounting or auditing matters.
Although the Company's Code of Conduct is applicable to all employees,
including its principal executive officer, principal financial officer and
controller, and generally meets the requirements of the Sarbanes-Oxley Act with
respect to the obligations of such persons, the Company expects to adopt, prior
to the filing of its Form 10-KSB for the year ended December 31, 2003, a
separate Financial Code of Ethics applicable to these persons. The Company's
Financial Code of Ethics, Code of Business Conduct and Ethics and Procedure for
Reporting Complaints will be filed as exhibits to the Company's Form 10-KSB
report for 2003.
PROPOSAL 1. ELECTION OF DIRECTORS
The number of directors is fixed at seven. One director, Mr. Downing, is to
be elected to hold office until the next Annual Meeting in 2005; one director,
Mr. Allio, is to be elected to hold office until the Annual Meeting in 2006; and
three directors, Messrs. Ash, Vernon and Whitmer, are to be elected to hold
office until the Annual Meeting in 2007. Notwithstanding the foregoing, each
director will serve until his successor is duly qualified and elected. The
nominees are listed below. Should any nominee decline or be unable to accept
such nomination or be unable to serve, an event which management does not now
expect, the Board of Directors reserves the right in its discretion to
substitute another person as a nominee or to reduce the number of nominees. In
this event, the proxy
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holders may vote in their discretion for any substitute nominee proposed by the
Board of Directors unless you indicate otherwise.
All the nominees currently are directors of the Company. There are no
family relationships among any of the directors and executive officers. No
person being nominated as a director is being proposed for election pursuant to
any agreement or understanding between any such person and the Company. The
following is information regarding each nominee and each director continuing in
office. Unless otherwise stated, each individual has held his current occupation
for at least five years.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF THE
NOMINEES NAMED IN THIS PROXY STATEMENT.
NOMINEES
THOMAS P. ASH is Superintendent of the Mid-Ohio Educational Service Center
in Mansfield, Ohio. Age 54. Director since 1985.
DAVID C. VERNON is President and Chief Executive Officer of the Company and
Chief Executive Officer of the Bank. Prior to assuming those positions in 2003,
he was Chairman and CEO of Founders Capital Corporation. Prior to forming
Founders Capital Corporation, Mr. Vernon was Chairman, President and CEO of
Summit Bancorp and Summit Bank in Akron, Ohio. He is Chairman of the Board of
the Company and the Bank. Age 63. Director since 2003.
JERRY F. WHITMER is a Partner of Brouse McDowell in Akron, Ohio and has
been with the law firm since 1971. Age 68. Director since 2003.
MARK S. ALLIO is President and CEO of Rock Financial Services in Livonia,
Michigan, the former president of Third Federal Savings in Cleveland, Ohio and
has worked in banking for more than 15 years. Age 49. Director since 2003.
WILLIAM R. DOWNING is President of R. H. Downing, Inc., an automotive
supply, sales and marketing agency and Chairman and Chief Executive Officer of
JohnDow Industries, Inc., a manufacturer and distributor of lubrication and
fluid handling equipment which he founded in 1988. Age 58. Director since 2003.
CONTINUING DIRECTORS
GERRY W. GRACE is President of Grace Services, Inc., a weed and pest
control company located in Canfield, Ohio. Age 64. Director since 1986. Current
term as director expires on the date of the Annual Meeting in 2005.
JEFFREY W. ALDRICH is President and Chief Executive Officer of Sterling
China, a dishware manufacturing company. Age 61. Director since 1979. Current
term as director expires on the date of the Annual Meeting in 2006.
INDEPENDENCE OF DIRECTORS
The Board of Directors has adopted Director Independence Standards to
assist in determining the independence of each director. In order for a director
to be considered independent, the Board of Directors must affirmatively
determine that the director has no material relationship with the Company. In
each case, the Board of Directors broadly considers all relevant facts and
circumstances, including the director's commercial, industrial, banking,
consulting, legal, accounting, charitable and familial relationships and such
other criteria as the Board of Directors may determine from time to time. These
Director Independence Standards are included with this proxy statement as
Appendix E.
The Board of Directors has determined that Messrs. Aldrich, Allio, Ash,
Downing, Grace and Whitmer meet these standards and are independent and, in
addition, satisfy the independence requirements of the Nasdaq Stock Market, Inc.
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Absent unusual circumstances, each director is expected to attend all
annual and special meetings of shareholders. All the directors who were board
members at the time of the 2003 Annual Meeting of Shareholders attended that
meeting.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company is responsible for establishing broad
corporate policies and for the overall performance of the Company. Directors
discharge their responsibilities at Board meetings and committee meetings. The
members of the Board of Directors of the Company also serve as members of the
Board of Directors of the Bank. The Boards of Directors of the Company and Bank
generally meet on a monthly basis and may have additional meetings as needed.
During the year ended December 31, 2003, the Board of Directors of the Company
held 12 meetings and the Board of Directors of the Bank held 12 meetings. Mr.
Whitmer attended 63% of the number of meetings of the Board and committees on
which he served. No other director attended fewer than 75% of the aggregate
number of Board meetings and meetings of committees on which he served. The
Board of Directors of the Company maintains committees, the nature and
composition of which are described below:
Audit Committee. The Audit Committee consists of Messrs. Allio, Ash, and
Grace. Each member of the Committee is independent as defined in the corporate
governance listing standards of the Nasdaq Stock Market, Inc. and the Company's
Director Independence Standards. Mr. Allio is the audit committee financial
expert and he is independent of management. The Audit Committee operates under a
written charter adopted by the Board of Directors, a copy of which is included
as Appendix A to this proxy statement. This committee is primarily responsible
for overseeing the engagement, independence and services of our independent
auditors and is also responsible for the review of audit reports and
management's actions regarding the implementation of audit findings and review
of compliance with all relevant laws and regulations. The Audit Committee met
four times during 2003.
AUDIT COMMITTEE REPORT
The Audit Committee operates under a written charter adopted by the Board
of Directors, a copy of which is included as Appendix A to this proxy statement.
The Board of Directors has determined that each Audit Committee member is
independent in accordance with the listing standards of the Nasdaq Stock Market.
The Company's management is responsible for the Company's internal controls
and financial reporting process. The independent auditors are responsible for
performing an independent audit of the Company's consolidated financial
statements and issuing an opinion on the conformity of those financial
statements with generally accepted accounting principles. The Audit Committee
oversees the Company's internal controls and financial reporting process on
behalf of the Board of Directors.
In this context, the Audit Committee has met and held discussions with
management and the independent auditors. Management represented to the Audit
Committee that Company's consolidated financial statements were prepared in
accordance with accounting principles generally accepted in the United States of
America, and the Audit Committee has reviewed and discussed the consolidated
financial statements with management and the independent auditors. The Audit
Committee discussed with the independent auditors matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication With Audit
Committees), including the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of the disclosures in the financial statements.
In addition, the Audit Committee has received the written disclosures and
the letter from the independent auditors required by the Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees) and has
discussed with the independent auditors the auditors' independence from the
Company and its management. In concluding that the auditors are independent, the
Audit Committee considered, among other factors, whether the non-audit services
provided by the auditors were compatible with its independence.
The Audit Committee discussed with the Company's independent auditors the
overall scope of plans for their audit. The Audit Committee meets with the
independent auditors, with and without management present, to
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discuss the results of their examination, their evaluation of the Company's
internal controls, and the overall quality of the Company's financial reporting.
In performing all of these functions, the Audit Committee acts only in the
oversight capacity. In its oversight role, the Audit Committee relies on the
work and assurances of the Company's management, which has a primary
responsibility for financial statement and reports, and of the independent
auditors who, in their report, express an opinion on the conformity of the
Company's financial statements to generally accepted accounting principles. The
Audit Committee's oversight does not provide it with an independent basis to
determine that management has maintained appropriate accounting and financial
procedures designed to assure compliance with accounting standards and
applicable laws and regulations. Furthermore, the Audit Committee's
considerations and discussions with management and the independent auditors do
not assure that the Company's financial statements are presented in accordance
with generally accepted accounting principles, that the audit of the Company's
financial statements has been carried out in accordance with generally accepted
auditing standards or that the Company's independent auditors are in fact
"independent".
In reliance on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board has approved,
that the audited consolidated financial statements be included in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 2003 for filing
with the Securities and Exchange Commission. The Audit Committee and the Board
of Directors also have approved, subject to stockholder ratification, the
selection of the Company's independent auditors.
Thomas P. Ash, Chairman
Mark S. Allio
Gerry W. Grace
Compensation and Management Development Committee. The Compensation and
Management Development Committee consists solely of Directors Aldrich, Ash, and
Grace. Each member of the Committee is independent as defined in the corporate
governance listing standards of the Nasdaq Stock Market, Inc. and the Company's
Director Independence Standards. The committee is responsible for establishing
compensation and benefits for the Chief Executive Officer and for reviewing the
incentive compensation programs when necessary, in addition to reviewing matters
regarding compensation and fringe benefits for other officers and employees of
the Company and Bank. The committee meets on an as-needed basis. The
Compensation and Management Development Committee of the Company met five times
in 2003. A copy of the Compensation and Management Development Committee charter
is included as Appendix B to this proxy statement.
Corporate Governance and Nominating Committee. The Corporate Governance
and Nominating Committee actively seeks individuals to become Board members who
have the highest personal and professional character and integrity, who possess
appropriate characteristics, skills, experience and time to make a significant
contribution to the Board of Directors, the Company and its shareholders, who
have demonstrated exceptional ability and judgment, and who will be most
effective, in the context of the whole Board of Directors and other nominees to
the Board of Directors, in perpetuating the success of the Company and in
representing shareholders' interests. The Committee may employ professional
search firms (for which it pays a fee) to assist it in identifying potential
members of the Board of Directors with the desired skills and disciplines.
The Committee will consider shareholder nominations for director on the
same basis and in the same manner as it considers nominations for director from
any other source. Any shareholder may submit a nomination in writing to the
Chair, Corporate Governance and Nominating Committee, c/o Corporate Secretary,
Central Federal Corporation, 2841 Riviera Drive, Suite 300, Fairlawn, Ohio
44333. The nominations must be accompanied by all the information relating to
the nominee required by the Company's Bylaws and the Securities and Exchange
Commission's proxy rules. The Company's Bylaws provide that, to be considered
timely, any shareholder nomination for director generally must be received in
writing by the Corporate Secretary at least 90 days before the date fixed for
the next Annual Meeting of shareholders; provided, however, under certain
unusual circumstances a nomination received as late as the 10th day after the
mailing of a notice of an Annual Meeting of Shareholders may be considered. A
copy of the full text of the Bylaw provisions relating to shareholder
nominations may be obtained by writing to the Corporate Secretary at 2841
Riviera Drive, Suite 300, Fairlawn, Ohio 44333.
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The Committee considers candidates for director nominees based on factors
it deems appropriate. These factors may include judgment, character, background,
skill, diversity, experience with businesses and other organizations of
comparable size, the interplay of the candidate's experience with the experience
of other Board members and the extent to which the candidate would be a
desirable addition to the Board and any committees of the Board. In addition,
because the Company is primarily a community financial services company, board
candidates must be highly regarded members of the community in which the Company
provides financial services.
The Corporate Governance and Nominating Committee met three times in 2003
and is currently composed of three directors: Messrs. Aldrich, Ash and Grace.
Each member of the Committee is independent as defined in the corporate
governance listing standards of the Nasdaq Stock Market, Inc. and the Company's
Director Independence Standards.
The Company does not currently have a website. A copy of the Corporate
Governance and Nominating Committee charter is attached as Appendix C.
Committee Charters and Other Corporate Governance Documents. The Audit
Committee Charter, Compensation and Management Development Committee Charter,
Corporate Governance and Nominating Committee Charter, Corporate Governance
Guidelines and Director Independence Standards are included with this proxy
statement as Appendices A, B, C, D and E, respectively. The Company's Code of
Business Conduct and Ethics, Financial Code of Ethics and Procedures for
Reporting Complaints will be filed as exhibits to the Company's Form 10-KSB for
the year ended December 31, 2003. You also may receive copies without charge by
writing to: Corporate Secretary, Central Federal Corporation, 2841 Riviera
Drive, Suite 300, Fairlawn, Ohio 44333.
COMMUNICATIONS WITH DIRECTORS
The Board of Directors also has adopted a process by which shareholders and
other interested parties may communicate with any committee chair or the
non-management directors as a group by e-mail or regular mail. Communications by
e-mail should be sent to EllyMackus@Centralfedbank.com. Communications by
regular mail should be sent to the attention of the Chair, Audit Committee;
Chair, Compensation and Management Development Committee; Chair, Corporate
Governance and Nominating Committee or to the Non-Management Directors, c/o
Corporate Secretary, Central Federal Corporation, 2841 Riviera Drive, Suite 300,
Fairlawn, Ohio 44333. All communications will be reviewed by management to
determine whether the communication requires immediate action. Management will
pass on all communications received, or a summary of such communications, to the
appropriate director or directors.
DIRECTORS' COMPENSATION
Directors' Fees. Each director is paid an annual retainer in the amount of
$15,000, which includes a retainer of $3,000 for service as a director of the
Company and a retainer of $12,000 for service as a director of the Bank. The
Chairman of the Board receives an additional $9,500 per year.
1999 Stock-Based Incentive Plan and 2003 Equity Compensation Plan. The
Company maintains the 1999 Stock-Based Incentive Plan and the 2003 Equity
Compensation Plan for the benefit of employees and outside directors of the
Company and the Bank. On November 16, 2003, the Board of Directors awarded
Messrs. Allio, Downing and Whitmer 500 shares of restricted Company common stock
each. The restricted stock awards will vest one year from the date of the award
and fully upon their death, disability or a change in control of the Company or
the Bank.
Director's Retirement Agreement. The Company and Bank entered into the
Director's Retirement Agreement with Mr. Williams on September 18, 2003 in
connection with his retirement as a director. Under the terms of the Agreement,
Mr. Williams will be available to the Corporation and the Bank on a consulting
basis in exchange for the following payments: $30,000 in 2004, $20,000 in 2005
and $6,667 in 2006. Additionally, the agreement provides that Mr. Williams, or,
in the event of his death, his surviving spouse, will continue to vest in, and
maintain the rights to, all stock options and stock awards granted to him under
the Company's stock-based
7
benefit plan, will be allowed to exercise all stock options anytime after they
become vested and until the close of business on July 14, 2009 and to receive
all stock awards when they become vested for so long as Mr. Williams continues
to agree to provide advice and consulting services to the Boards of Directors of
the Company and Bank.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table shows for 2003, 2002 and
2001, the cash compensation paid by the Company, as well as certain other
compensation paid or accrued for those years, to the chief executive officer and
the next four most highly paid executive officers of the Company who received
salary and bonus in excess of $100,000 during 2003.
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------------- -------------------------------------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS/SARS PAYOUTS COMPENSATION
NAME AND POSITION YEAR ($) (1) ($) ($) (2) ($) (3) (#) (4) ($) (5) ($) (6)(7)
----------------- ---- -------- ------- ------------ ------------ ------------ ------- ------------
David C. Vernon (8)...... 2003 $109,716 $ -- $-- $176,944 39,390 $-- $ --
Chairman, President and
Chief Executive Officer
William R. Williams...... 2003 55,617 -- -- -- -- -- 875,828
Former President and 2002 172,515 -- -- -- -- -- 35,683
Chief Executive Officer 2001 163,698 20,000 -- -- -- -- 37,903
---------------
(1) Salary includes amounts deferred pursuant to the Company's 401(k) plan.
(2) There were no (a) perquisites over the lesser of $50,000 or 10% of the
individual's total salary and bonus for the last year, (b) payments of
above-market preferential earnings on deferred compensation, (c) payments of
earnings with respect to long-term incentive plans prior to settlement or
maturation, (d) tax payment reimbursements, or (e) preferential discounts on
stock.
(3) On January 16, 2003, 3,875 shares of restricted stock were granted to Mr.
Vernon and vest at a rate of 20% each year over 5 years beginning on January
16, 2004. On April 17, 2003, 12,000 shares of restricted stock were granted
to Mr. Vernon and vest at a rate of one-third each year over 3 years
beginning on March 31, 2004. At December 31, 2003, the total value of the
15,875 unvested shares of restricted stock was $255,429 based on the closing
price of the Company stock on that date. Mr. Vernon receives dividends on
the unvested shares.
(4) On January 16, 2003, Mr. Vernon was granted 11,390 options which vest at a
rate of 20% each year over 5 years beginning on January 16, 2004. On April
17, 2003, Mr. Vernon was granted 11,632 and 16,368 options which vest at a
rate of one-third each year over 3 years beginning on March 31, 2004.
(5) The Company had no long-term incentive plans in existence during 2003, 2002
and 2001.
(6) For 2003, other compensation includes $796,214 paid to Mr. Williams pursuant
to the Supplemental Executive Retirement Agreement upon his retirement as
Chief Executive Officer on February 20, 2003 and President on April 23, 2003
and $79,614 representing the market value of shares allocated to Mr.
Williams under the Employee Stock Ownership Plan.
(7) For 2001 and 2002, other compensation includes the market value of shares
allocated to Mr. Williams under the Employee Stock Ownership Plan.
(8) Mr. Vernon was appointed Chief Executive Officer on February 20, 2003 and
President on April 23, 2003.
8
Option/SAR Grants Table. The following table shows stock options granted
to the named executive officers of the Company in 2003.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/ SARS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES IN EXERCISE OR BASE
NAME GRANTED (#) (1)(2) FISCAL YEAR PRICE ($/SHARE) EXPIRATION DATE
---- ------------------ ---------------- ---------------- ---------------
David C. Vernon..................... 11,390 12.74% $10.05 1/16/2013
28,000 31.32% $11.50 4/17/2013
---------------
(1) On January 16, 2003, Mr. Vernon was granted 11,390 options which vest at a
rate of 20% each year over 5 years beginning on January 16, 2004.
(2) On April 17, 2003, Mr. Vernon was granted 11,632 and 16,368 options which
vest at a rate of one-third each year over 3 years beginning on March 31,
2004.
Aggregate Option/SAR Exercises and Year-End Option Value Table. The
following table shows information concerning the number and value of stock
options held by the named executive officers at December 31, 2003, measured in
terms of the $16.09 closing price of the Company's common stock on December 31,
2003.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION /SAR
VALUE TABLE
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTION/SARS
SHARES DECEMBER 31, 2003 AT DECEMBER 31, 2003 (1)
ACQUIRED ON VALUE --------------------------- ---------------------------
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
---- ----------- -------- ----------- ------------- ----------- -------------
David C. Vernon..................... -- -- -- 39,390 $ -- $197,316
William R. Williams................. -- -- 38,776 9,696 267,554 66,902
---------------
(1) The difference between the aggregate option exercise price and the fair
market value of the underlying shares at December 31, 2003.
Employment Agreements. The Bank and the Company maintain employment
agreements with David C. Vernon, President and Chief Executive Officer of the
Bank and Company (the Executive). The Employment Agreements provide for a
three-year term. Effective February 28, 2003, the base salary for Mr. Vernon was
$120,000. In addition to base salary, the Employment Agreements provide for,
among other things, participation in various employee benefit plans and
stock-based compensation programs, as well as furnishing certain fringe benefits
available to similarly-situated executive personnel. The Employment Agreements
provide for termination by the Bank or the Company for cause (as described in
the agreement) at any time. In the event the Bank or Company choose to terminate
the Executive's employment for reasons other than for cause, or in the event of
the Executive's resignation from the Bank or the Company upon: (i) failure to
re-elect the Executive to his current offices; (ii) a material change in the
Executive's functions, duties or responsibilities; (iii) a relocation of the
Executive's principal place of employment by more than 25 miles; (iv) a material
reduction in the benefits and perquisites to the Executive; (v) liquidation or
dissolution of the Bank or the Company, or (vi) a breach of the Employment
Agreements by the Bank or the Company, the Executive or, in the event of the
Executive's death, the Executive's beneficiary would be entitled to receive an
amount generally equal to the remaining base salary and bonus payments that
would have been paid to the Executive during the remaining term of the
Employment Agreements, plus all benefits that would have been provided to the
Executive during the remaining term of the agreements.
Under the agreements, if involuntary or voluntary termination (under
certain circumstances) followed a change in control of the Bank or the Company,
the Executive or, in the event of the Executive's death, the Executive's
beneficiary is entitled to a severance payment equal to the greater of (i) the
payments due for the remaining terms of the agreements; or (ii) three times the
average of the five preceding taxable years' annual
9
compensation. The Bank and the Company would also continue the Executive's life,
health, and disability coverage for thirty-six months. Notwithstanding that both
Employment Agreements provided for a severance payment in the event of a change
in control, the Executive would only be entitled to receive a severance payment
under one agreement.
Payments to the Executive under the Bank's Employment Agreement are
guaranteed by the Company in the event that payments or benefits are not paid by
the Bank. Payments under the Company Employment Agreement are to be made by the
Company. All reasonable costs and legal fees paid or incurred by the Executive
pursuant to any dispute or question of interpretation relating to the Employment
Agreements are to be paid by the Bank or Company, respectively, if the Executive
is successful on the merits pursuant to a legal judgment, arbitration or
settlement. The Employment Agreements also provide that the Bank and Company
indemnify the Executive to the fullest extent allowable under federal, Ohio and
Delaware law, respectively.
Supplemental Executive Retirement Agreement. The Company and Bank entered
into a Supplemental Executive Retirement Agreement (SERA) with Mr. Williams on
April 1, 2003 in connection with his retirement as President and Chief Executive
Officer. Under the terms of the SERA, Mr. Williams received a lump sum payment
of $796,214 upon his retirement and the Company's and Bank's obligations under
employment agreements with Mr. Williams were terminated. The SERA replaced the
employment agreements with Mr. Williams and Supplemental Executive Retirement
Plan (SERP), of which Mr. Williams was the only participant. No payments were
made under either the employment agreements or SERP in 2003.
ADDITIONAL INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS
Compliance With Section 16(a) of the Exchange Act. Section 16(a) of the
Securities Exchange Act of 1934 requires the Company's executive officers and
directors, and persons who own more than 10% of any registered class of the
Company's equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (SEC). Executive officers,
directors and greater than 10% shareholders are required by SEC regulations to
furnish the Company copies of all Section 16(a) reports they file.
Based solely on a review of the copies of all such reports of ownership
furnished to the Company, or written representations that no forms were
necessary, we believe there were no known failures to file a required Form. The
Company noted the following for the year ended December 31, 2003: Four reports
were filed late for Mr. Aldrich, which resulted in three transactions not
reported on a timely basis. Six reports were filed late for Mr. Allio, which
resulted in five transactions not reported on a timely basis. Three reports were
filed late for Mr. Downing, which resulted in two transactions not reported on a
timely basis. Three reports were filed late for Mr. Whitmer, which resulted in
two transactions not reported on a timely basis. Six reports were filed late for
Mr. Vernon, which resulted in eight transactions not reported on a timely basis.
Two reports were filed late for Mr. Baumgardner, which resulted in one
transaction not reported on a timely basis. Two reports were filed late for Mr.
Heh, which resulted in two transactions not reported on a timely basis. One
report was filed late for Ms. Liutkus and did not involve any transactions.
Three reports were filed late for Mr. MacDonell, which resulted in four
transactions not reported on a timely basis. Two reports were filed late for Ms.
Mackus, which resulted in two transactions not reported on a timely basis. In
all cases, these late transactions were reported on Form 5.
Certain Relationships and Related Transactions. Federal regulations
require that all loans or extensions of credit to executive officers and
directors of insured financial institutions must be made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with the general public, except for loans made
pursuant to programs generally available to all employees, and must not involve
more than the normal risk of repayment or present other unfavorable features.
The Bank is therefore prohibited from making any new loans or extensions of
credit to executive officers and directors at different rate or terms than those
offered to the general public, except for loans made pursuant to programs
generally available to all employees, and has adopted policy to this effect. In
addition, loans made to a director or executive officer in an amount that, when
aggregated with the amount of all other loans to such person and his or her
related interests, are in excess of the greater of $25,000 or 5% of the Bank's
capital and surplus (up to a maximum of $500,000) must be approved in advance by
a majority of the disinterested members of the Board of Directors.
10
As of December 31, 2003, there were no loans outstanding to any executive
officers, directors or their related interests.
Founders Capital Corporation, of which Mr. Vernon was the founder, received
a consulting fee of $75,000 from the Company on January 24, 2003 which was prior
to the time Mr. Vernon became President and Chief Executive Officer of the
Company.
PROPOSAL 2. AMENDED AND RESTATED
CENTRAL FEDERAL CORPORATION 2003 EQUITY COMPENSATION PLAN
(formerly referred to as the Grand Central Financial Corp.
2003 Equity Compensation Plan)
PROPOSED ACTION REGARDING THE 2003 EQUITY COMPENSATION PLAN
At the Meeting, shareholders will be asked to approve the amendment and
restatement of the Grand Central Financial Corp. 2003 Equity Compensation Plan
("2003 Equity Compensation Plan") which was adopted, subject to shareholder
approval, by the Board of Directors on February 19, 2004. The 2003 Equity
Compensation Plan was originally approved by Company shareholders on April 23,
2003. The plan is being amended and restated to:
1. Increase the number of shares of Company common stock reserved for
issuance under the 2003 Equity Compensation Plan;
2. Replace references to Grand Central Financial Corp. and Central Federal
Savings and Loan Association of Wellsville with Central Federal
Corporation and Central Federal Bank;
3. Provide for the grant of Stock Appreciation Rights; and
4. Comply with certain regulatory and listing requirements.
The Company believes that incentive and stock-based awards focus employees
and directors on the dual objective of creating shareholder value and promoting
the Company's success, and that equity compensation plans like the 2003 Equity
Compensation Plan help attract, retain and motivate valued employees and
directors. The Board of Directors believes that the 2003 Equity Compensation
Plan, as amended and restated, will help enable the Company to compete
effectively with other financial institutions, attract and retain key personnel
and secure the services of experienced and qualified persons as directors.
As of February 27, 2004, there were no shares available for additional
grants of stock options or restricted stock awards under the 2003 Equity
Compensation Plan.
SUMMARY DESCRIPTION OF THE AMENDED AND RESTATED 2003 EQUITY COMPENSATION PLAN
The principal terms of the Amended and Restated 2003 Equity Compensation
Plan are summarized below. The following summary is qualified in its entirety by
the full text of the plan, which appears as Appendix F to this proxy statement.
Purposes of the Amended and Restated 2003 Equity Compensation Plan. The
purposes of the Amended and Restated 2003 Equity Compensation Plan are to
provide incentives and rewards to those employees and directors largely
responsible for the success and growth of the Company and its affiliates, and to
assist the Company in attracting and retaining directors, executives and other
key employees with experience and ability.
Administration. The Board of Directors of the Company will administer the
Amended and Restated 2003 Equity Compensation Plan (the "Committee"). Subject to
the terms of the plan, the Committee interprets the plan and is authorized to
make all determinations and decisions thereunder. The Committee also determines
the participants to whom awards will be granted, the type and amount of awards
that will be granted and the terms and conditions applicable to such awards.
Each award granted under the Amended and Restated 2003 Equity Compensation Plan
will be evidenced by an award agreement that sets forth the terms and conditions
of each award.
11
Eligibility. All employees and outside directors of the Company and the
Bank are eligible to participate in the Amended and Restated 2003 Equity
Compensation Plan.
Authorized Shares. Prior to the restatement of the 2003 Equity
Compensation Plan, the Company reserved 100,000 shares of Company common stock
for issuance under the plan. Of that amount, no more than 30,000 shares could be
issued as restricted stock awards. The Amended and Restated 2003 Equity
Compensation Plan reserves an additional 100,000 shares of Company common stock
of which all of the shares can be used for stock options or stock appreciation
rights, but no more than 30,000 shares of the additional reserve can be used for
restricted stock awards. The shares of Company common stock to be issued under
the Amended and Restated 2003 Equity Compensation Plan may be either authorized
but unissued shares, or reacquired shares held by the Company as treasury stock.
To the extent that an award is settled in cash or a form other than shares
of Company common stock, the shares that would have been delivered had there
been no cash or other settlement will not be counted against the shares
available for issuance under the plan. In the event that shares are delivered in
respect of a stock appreciation right, or other award, only the actual number of
shares delivered with respect to the award will be counted against the share
limits of the plan. Shares that are subject to or underlie awards that expire
for any reason or are cancelled, terminated or forfeited, fail to vest, or for
any other reason are not paid or delivered under the Amended and Restated 2003
Equity Compensation Plan will again be available for subsequent awards under the
plan. Shares that are exchanged by a participant or withheld by the Company to
satisfy tax withholding obligations under the plan will be available for
subsequent awards under the Amended and Restated 2003 Equity Compensation Plan.
Types of Awards. The Amended and Restated 2003 Equity Compensation Plan
authorizes grants of stock options, stock appreciation rights and restricted
stock awards.
A stock option is the right to purchase shares of Company common stock at a
future date at a specified price per share (the "exercise price"). The per share
exercise price of stock option may not be less than the fair market value of a
share of Company common stock on the date of grant. The exercise price for a
stock option may be paid in cash, common stock or a combination of cash and
common stock, or through a cashless exercise, to the extent permitted by the
Committee. Upon written consent of the Committee, non-statutory stock options
may be transferred pursuant to the terms of the plan. Incentive stock options
may not be transferred or assigned. The maximum term of a stock option is ten
years from the date of grant. The plan provides for the grant of incentive stock
options and non-statutory stock options. (see -- "Federal Income Tax Treatment
of Awards Under the Amended and Restated 2003 Equity Compensation Plan", below).
A stock appreciation right is the right to receive payment of an amount
equal to the excess of the fair market value per share of Company common stock
on the date of exercise of the stock appreciation right over the base price of
the stock appreciation right. The base price may not be lower than the fair
market value of a share of Company common stock on the date of grant. Stock
appreciation rights may be granted in connection with other awards or
independently. The maximum term of a stock appreciation right is ten years from
the date of grant. (see -- "Federal Income Tax Treatment of Awards Under the
Amended and Restated 2003 Equity Compensation Plan", below).
A restricted stock award is a grant of a certain number of shares of
Company common stock subject to the lapse of certain restrictions (such as
continued service) determined by the Committee. Participants are entitled to
receive dividends and other distributions declared and paid on the shares and
may also vote any unvested shares subject to their restricted stock awards.
(see -- "Federal Income Tax Treatment of Awards Under the Amended and Restated
2003 Equity Compensation Plan", below).
Effect of Termination of Service and Change in Control on Awards. The
Amended and Restated 2003 Equity Compensation Plan provides that all outstanding
awards will vest upon death, termination of service due to disability or upon a
change in control, as defined in the plan. Options and stock appreciation rights
that vest upon death or disability remain exercisable for one (1) year following
termination of service. Options and stock appreciation rights that vest upon a
change in control remain exercisable for their term. In the event of a
Termination for Cause (as defined in the plan), award recipients forfeit all
rights to unvested and unexercised
12
awards. Unless otherwise determined by the Committee, upon an award recipient's
retirement, the recipient forfeits all unvested awards and has one (1) year to
exercise vested stock options and stock appreciation rights. Incentive stock
options exercised more than three (3) months from an optionee's retirement date
will be treated as non-statutory stock options for tax purposes. Award
recipients that terminate service for reasons other than death, disability,
retirement or cause forfeit all rights to any unvested awards. Vested and
unexercised stock options and stock appreciation rights remain exercisable for
three (3) months following termination of service.
Term of the Plan. The plan will terminate on April 23, 2013, unless
terminated sooner by the Board of Directors.
Amendment of the Plan and Awards. The plan allows the Board of Directors
to amend the plan in certain respects without shareholder approval, unless such
approval is required to comply with tax law regulatory or listing requirements.
Awards cannot be amended without the written consent of an award recipient.
FEDERAL INCOME TAX TREATMENT OF AWARDS UNDER THE AMENDED AND RESTATED 2003
EQUITY COMPENSATION PLAN
The federal income tax consequences of the Amended and Restated 2003 Equity
Compensation Plan, under current federal law, which is subject to change, are
summarized in the following discussion of the general tax principles applicable
to the plan. This summary is not intended to be exhaustive and, among other
considerations, does not describe state or local tax consequences.
Non-Statutory Stock Options (NSO). The Company is generally entitled to
deduct, and the optionee recognizes taxable income in an amount equal to, the
difference between the option exercise price and the fair market value of the
shares at the time of exercise.
Stock Appreciation Rights. Stock appreciation rights are generally taxed
and deductible in substantially the same manner as NSOs.
Incentive Stock Options (ISO). If an optionee disposes of shares of
Company common stock acquired upon exercise of an ISO within two years of the
date of grant or one year of the date of exercise, the optionee will recognize
ordinary income, and the Company will be entitled to a deduction, equal to the
excess of the fair market value of the shares on the date of exercise over the
exercise price (limited generally to the gain on the sale). The balance of any
gain or loss will be treated as a capital gain or loss to the optionee. If the
shares are disposed of after the two year and one year periods mentioned above,
the Company will not be entitled to any deduction, and the entire gain or loss
for the optionee will be treated as a capital gain or loss. However, the excess
of the fair market value of the shares on the date of exercise over the exercise
price is includible for purposes of determining an optionee's alternative
minimum tax liability.
The aggregate fair market value of the shares for which ISOs granted to any
employee may be exercisable for the first time by such employee during any
calendar year (under all Company plans) may not exceed $100,000.
Restricted Stock Award. A restricted stock award recipient recognizes
ordinary income, and the Company is entitled to a corresponding deduction, equal
to the fair market value of the stock at the time any transfer or forfeiture
restrictions applicable to the restricted stock award lapse. A restricted stock
award recipient who makes an election under Section 83(b) of the Internal
Revenue Code, however, recognizes ordinary income equal to the fair market value
of the stock at the time of grant, and the Company is entitled to a
corresponding deduction at that time. If the recipient makes a Section 83(b)
election, there are no further federal income tax consequences to either the
recipient or the Company at the time any applicable transfer or forfeiture
restrictions lapse.
SPECIFIC BENEFITS UNDER THE AMENDED AND RESTATED EQUITY COMPENSATION PLAN
The Company has not approved any awards under the Amended and Restated 2003
Equity Compensation Plan that are conditioned upon shareholder approval of the
plan and is not currently considering any specific award grants under the
Amended and Restated 2003 Equity Compensation Plan.
13
Equity Compensation Plan Information. The following table sets forth
information about Company common stock that may be issued upon exercise of
options, warrants and rights under all of the Company's equity compensation
plans as of December 31, 2003.
NUMBER OF SECURITIES
TO BE ISSUED UPON NUMBER OF SECURITIES
EXERCISE OF WEIGHTED-AVERAGE REMAINING AVAILABLE
OUTSTANDING EXERCISE PRICE OF FOR FUTURE ISSUANCE
OPTIONS, OUTSTANDING OPTIONS, UNDER EQUITY
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS COMPENSATION PLANS
------------- -------------------- -------------------- --------------------
Equity compensation plans approved by
shareholders......................... 209,721 $ 10.17 11,385
Equity compensation plans not approved
by shareholders...................... -- -- --
-------- -------- --------
Total.................................. 209,721 $ 10.17 11,385
======== ======== ========
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE
AMENDED AND RESTATED 2003 CENTRAL FEDERAL CORPORATION EQUITY COMPENSATION PLAN.
PROPOSAL 3. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Crowe Chizek and Company LLC to be its
auditors for 2004, subject to ratification by shareholders. A representative of
Crowe Chizek and Company LLC will be present at the Meeting to respond to
appropriate questions from shareholders and will have the opportunity to make a
statement should he or she desire to do so.
If ratification of the appointment of the auditors is not approved by a
majority of the votes cast by shareholders at the Meeting, other independent
auditors will be considered by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF CROWE CHIZEK AND COMPANY LLC AS THE COMPANY'S INDEPENDENT
AUDITORS FOR 2004.
The following table sets forth the fees billed to the Company for 2003 and
2002 by Crowe Chizek and Company LLC:
2003 2002
------- -------
Audit Fees.................................................. $50,500 $53,000
Audit related fees.......................................... 7,500 4,585
Tax fees.................................................... 6,000 8,890
Other fees.................................................. -- --
------- -------
Total....................................................... $64,000 $66,475
======= =======
The Audit Committee believes that the provision of non-audit services by
Crowe Chizek and Company LLC is compatible with maintaining Crowe Chizek and
Company LLC's independence.
14
STOCK OWNERSHIP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table provides information as of February 27, 2004 about the
persons known by the Company to be beneficial owners of more than 5% of the
Company's outstanding common stock. A person may be considered to beneficially
own any shares of common stock over which he or she has, directly or indirectly,
sole or shared voting or investment power.
AMOUNT AND NATURE OF PERCENT OF COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP STOCK OUTSTANDING
------------------------------------ -------------------- -----------------
Central Federal Bank Employees' Savings &........ 157,464 7.8%
Profit Sharing Plan and Trust 601 Main Street
Wellsville, Ohio
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as of February 27, 2004 with
respect to the amount of shares of Company common stock considered to be owned
by each director or nominee for director of the Company, by each executive
officer named in the Summary Compensation Table and by all directors and
executive officers of the Company as a group. A person may be considered to own
any shares of common stock over which he or she has, directly or indirectly,
sole or shared voting or investment power.
AMOUNT AND NATURE OF PERCENT OF COMMON
NAME TITLE BENEFICIAL OWNERSHIP STOCK OUTSTANDING
---- ----- -------------------- -----------------
David C. Vernon............. Chairman of the Board, 46,596(1) 2.3%
President and Chief
Executive Officer
Jeffrey W. Aldrich.......... Director 32,408(2) 1.6%
Mark S. Allio............... Director 2,135(3) 0.1%
Thomas P. Ash............... Director 31,634(2) 1.6%
William R. Downing.......... Director 16,692(3) 0.8%
Gerry W. Grace.............. Director 41,634(2) 2.0%
Jerry F. Whitmer............ Director 5,500(3) 0.3%
William R. Williams......... Former President and 101,454(4) 4.9%
Chief Executive Officer
All directors and executive
officers as a group (13 persons)................... 361,643(5) 17.2%
---------------
(1) Includes 15,100 shares awarded to Mr. Vernon pursuant to the Company's
equity compensation plans which have not yet vested, but as to which he may
provide voting recommendations. Includes 11,609 shares which may be acquired
by exercising stock options within 60 days.
(2) Includes 774 shares awarded to these outside directors pursuant to the
Company's equity compensation plans which have not yet vested, but as to
which they may provide voting recommendations. Includes 7,756 shares which
may be acquired by exercising stock options within 60 days.
(3) Includes 500 shares awarded to these outside directors pursuant to the
Company's equity compensation plans which have not yet vested, but as to
which they may provide voting recommendations.
(4) Includes 3,878 shares awarded to Mr. Williams pursuant to the Company's
equity compensation plans which have not yet vested, but as to which he may
provide voting recommendations. Includes 38,776 shares which may be acquired
by exercising stock options within 60 days.
(5) Includes 35,800 shares awarded to all directors and executive officers as a
group pursuant to the Company's equity compensation plans which have not yet
vested, but as to which they may provide voting recommendations. Includes
78,318 shares which may be acquired by exercising stock options within 60
days.
15
MISCELLANEOUS
The Company will pay the cost of this proxy solicitation. In addition to
soliciting proxies by mail, the Company has retained Georgeson Shareholder to
assist with the solicitation of proxies for a fee of $5,500 plus expenses. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of the Company's common stock. Directors, officers and
regular employees of the Company may also solicit proxies personally or by
telephone and will not receive additional compensation for these activities.
SHAREHOLDER PROPOSALS
The Company will consider for inclusion in its proxy materials for the 2005
Annual Meeting of Shareholders any shareholder proposal received by the Company
at its main office at 2841 Riviera Drive, Suite 300, Fairlawn, Ohio 44333 by
November 15, 2004. If the 2005 Annual Meeting of Shareholders is held on a date
more than 30 calendar days after April 20, 2005, the Company will consider any
shareholder proposal received within a reasonable time before the Company begins
to print and mail its proxy solicitation for the 2005 Annual Meeting. In
determining whether to include a shareholder proposal in its proxy materials,
the Company will apply the criteria set forth in the Securities and Exchange
Commission's proxy rules and interpretative guidance. Shareholder nominations
for director are discussed above under the caption "Corporate Governance and
Nominating Committee."
A COPY OF THE FORM 10-KSB (WITHOUT EXHIBITS) FOR THE YEAR ENDED DECEMBER
31, 2003, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WILL BE
FURNISHED WITHOUT CHARGE TO SHAREHOLDERS OF RECORD UPON WRITTEN REQUEST TO THE
CORPORATE SECRETARY, CENTRAL FINANCIAL CORPORATION, 2841 RIVIERA DRIVE, SUITE
300, FAIRLAWN, OHIO 44333
BY ORDER OF THE BOARD OF DIRECTORS
(/s/ Eloise L. Mackus)
Eloise L. Mackus
Corporate Secretary
Wellsville, Ohio
March 15, 2004
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER
OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO SIGN, DATE
AND PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
16
APPENDIX A
AUDIT COMMITTEE CHARTER
PURPOSE
The Audit Committee (the "Audit Committee") of the Board of Directors (the
"Board") of Central Federal Corporation (the "Company") will be appointed by the
Board (A) to assist the Board in its oversight of (i) the integrity of the
Company's financial statements, (ii) the independence and qualifications of the
Company's independent auditors, (iii) the performance of the Company's internal
audit function and independent auditors and (iv) the Company's compliance with
legal and regulatory requirements and (B) to prepare the Audit Committee report
required to be included in the Company's proxy statement.
MEMBERSHIP
The Audit Committee will be comprised of a minimum of three members, each a
director appointed by the Board on recommendation of the Company's Corporate
Governance and Nominating Committee who shall serve at the pleasure of the Board
for such term or terms as the Board may determine. Each member must meet the
independence and experience requirements set forth in NASD Rule 4200(a)(15),
Section 10A(m)(3) of the Securities Exchange Act of 1934 (the "Exchange Act")
and the rules and regulations of the Securities Exchange Commission (the
"Commission"), as such requirements may be amended from time to time, and no
member may have participated in preparation of the financial statements of the
Company at any time during the most recent three-year period.
Each member must be able to read and understand financial statements at the
time of appointment. At least one member shall have past employment experience
in finance or accounting, requisite professional certification in accounting or
any other comparable experience that result's in the member's financial
sophistication, such as service as a chief executive officer, chief financial
officer or other senior officer with financial oversight responsibilities. At
least one member shall be an "audit committee financial expert" as defined in
applicable law and regulations: specifically, such member must have (i) an
understanding of generally accepted accounting principals and financial
statements, (ii) the ability to assess the general application of such
principals in connection with accounting for estimates, accruals and reserves,
(iii) experience in preparing, auditing, analyzing and evaluating financial
statements comparable in breadth and complexity to the Company's financial
statements, or experience in actively supervising one or more persons engaged in
such activities, (iv) an understanding of internal controls and procedures for
financial reporting and (v) an understanding of audit committee functions.
No member of the Audit Committee may accept any consulting, advisory or
compensatory fee from the Company, other than in the member's capacity as a
member of the Board or a committee of the Board. No member of the Audit
Committee may be an affiliated person of the Company, except as a member of the
Board or a committee of the Board. No member may serve simultaneously on the
audit committees of more than two other public companies, unless the Board
determines that such simultaneous service would not impair the ability of such
member to serve effectively on the Audit Committee, and the Company discloses
this determination in its proxy statement.
MEETINGS
The Audit Committee will meet at least once each fiscal quarter. It will
meet periodically with management, internal auditors and independent auditors in
separate executive sessions. The Audit Committee may request any officer or
other employee of the Company, the independent auditors or outside legal counsel
to attend any meeting of the Audit Committee or to meet with any member of or
consultant to the Audit Committee.
AUTHORITY AND RESPONSIBILITY
- The Audit Committee will have sole authority to appoint or replace the
independent auditors and will have direct responsibility for compensation
and oversight of the independent auditors with respect to preparation and
issuance of the audit report and related work. The Audit Committee will
resolve disputes
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between management and the independent auditors relating to the audit
report. The independent auditors will report directly to the Audit
Committee.
- The Audit Committee must approve in advance all audit services and
permitted non-audit services to be provided to the Company by the
independent auditors, including the fees for such services and the terms
of service; provided, however, that non-audit services that fall within
the de minimis exceptions described in Section 10A (i) (1) (B) of the
Exchange Act will not require advance approval, if approved by the Audit
Committee prior to completion of the audit.
- The Audit Committee may form one or more subcommittees, comprised of one
or more members of the Audit Committee, and delegate to a subcommittee
authority to grant advance approval of audit services and permitted
non-audit services; provided, however, that any decision of a
subcommittee shall be presented to the full Audit Committee at its next
scheduled meeting.
- The Audit Committee may retain independent legal counsel or accounting or
other advisors. The Company will provide funding, as deemed appropriate
by the Audit Committee, for payment for services to the Audit Committee
by its legal, accounting and other advisors and for payment to the
independent auditors for work done in connection with the preparation and
issuance of the audit report.
- The Audit Committee will make regular reports to the Board. The Audit
Committee will review this charter annually to assess its adequacy and
recommend changes to the Board. The Audit Committee will review its own
performance annually.
- With respect to financial statements and disclosure matters, the Audit
Committee, to the extent it deems appropriate, will:
1. Review and discuss with management and the independent auditors the
annual audited financial statements, including disclosures made in
management's discussion and analysis, and recommend to the Board
whether the audited financial statements should be included in the
Company's Form 10-KSB.
2. Review and discuss with management and the independent auditors the
Company's quarterly financial statements prior to the filing of its
Form 10-QSB, including the results of the independent auditors' review
of the quarterly financial statements.
3. Discuss with management and the independent auditors significant
financial reporting issues and judgments made in connection with the
preparation of the Company's financial statements, including any
significant changes in the Company's selection or application of
accounting principles, any major issues as to the adequacy of the
Company's internal controls and any special steps adopted in light of
material control deficiencies.
4. Review and discuss quarterly reports from the independent auditors on:
(a) all critical accounting policies and practices to be used; (b) all
alternative treatments of financial information within generally
accepted accounting principles that have been discussed with
management, ramifications of the use of such alternative disclosures
and treatments, and the treatment preferred by the independent
auditors; (c) other material written communications between the
independent auditors and management, such as any management letter or
schedule of unadjusted differences.
5. Discuss with management the Company's earnings press releases,
including the use of "pro forma" or "adjusted" non-GAAP information, as
well as financial information and earnings guidance provided to
analysts and rating agencies. Such discussion may be done generally
(consisting of discussing the types of information to be disclosed and
the types of presentations to be made).
6. Discuss with management and the independent auditors the effect of
regulatory and accounting initiatives as well as off-balance sheet
structures on the Company's financial statements.
7. Discuss with management the Company's major financial risk exposures
and the steps management has taken to monitor and control such
exposures, including the Company's risk assessment and risk management
policies.
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8. Discuss with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the
conduct of the audit, including any difficulties encountered in the
course of the audit work, any restrictions on the scope of activities
or access to requested information, and any significant disagreements
with management.
9. Review disclosures made to the Audit Committee by the Company's CEO and
CFO during their certification process for the Form 10-KSB and Form
10-QSB about any significant deficiencies in the design or operation of
internal controls or material weaknesses therein and any fraud
involving management or other employees who have a significant role in
the Company's internal controls.
- In connection with its oversight of the Company's relationship with its
independent auditors, the Audit Committee, to the extent it deems
appropriate, will:
1. Review and evaluate the lead partner of the independent auditors' team.
2. Obtain and review a report from the independent auditors at least
annually regarding (a) the independent auditors' internal
quality-control procedures, (b) any material issues raised by the most
recent internal quality-control review, or peer review, of the firm,
(c) any steps taken to deal with any such issues and (d) all
relationships between the independent auditors and the Company.
Evaluate the qualifications, performance and independence of the
independent auditors, including considering whether the auditors'
quality controls are adequate and the provision of permitted non-audit
services is compatible with maintaining the auditors' independence,
taking into account the opinions of management and internal auditors.
The Audit Committee shall present its conclusions with respect to the
independent auditors to the Board.
3. Ensure the rotation of the lead (or coordinating) audit partner having
primary responsibility for the audit and the audit partner responsible
for reviewing the audit as required by law. Consider whether, in order
to assure continuing auditor independence, it is appropriate to adopt a
policy of rotating the independent auditing firm on a regular basis.
4. Recommend to the Board policies for the Company's hiring of employees
or former employees of the independent auditors who participated in any
capacity in the audit of the Company.
5. Discuss with the national office of the independent auditors issues on
which the independent auditors were consulted by the Company's audit
team and matters of audit quality and consistency.
6. Meet with the independent auditors prior to the audit to discuss the
planning and staffing of the audit.
- In connection with its responsibility to provide oversight of the
Company's internal audit function, the Audit Committee, to the extent it
deems appropriate, will:
1. Review the appointment and replacement of the senior internal auditing
executive.
2. Review the significant reports to management prepared by the internal
auditing department and management's responses.
3. Discuss with the independent auditors and management the internal audit
department responsibilities, budget and staffing and any recommended
changes in the planned scope of the internal audit.
- In connection with its compliance oversight responsibilities, the Audit
Committee, to the extent it deems appropriate, will:
1. Obtain from the independent auditors assurance that Section 10A (b) of
the Exchange Act has not been implicated.
2. Obtain reports from management, the Company's senior internal auditing
executive and the independent auditors that the Company and its
subsidiary entities are in conformity with applicable legal
requirements and the Company's ethics codes.
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3. Review reports and disclosures of insider and affiliated party
transactions. Advise the Board with respect to the Company's policies
and procedures regarding compliance with applicable laws and
regulations and with the Company's ethics codes.
4. Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters and the confidential, anonymous
submission by employees of concerns regarding questionable accounting
or auditing matters.
5. Discuss with management and the independent auditors any correspondence
with regulators or governmental agencies and any published reports
which raise material issues regarding the Company's financial
statements or accounting policies.
6. Discuss with the Company's General Counsel legal matters that may have
a material impact on the financial statements or the Company's
compliance policies.
LIMITATION OF AUDIT COMMITTEE'S ROLE
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements and disclosures
are complete and accurate and are in accordance with generally accepted
accounting principles and applicable rules and regulations. These are the
responsibilities of management and the independent auditors.
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APPENDIX B
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE CHARTER
PURPOSE
The purpose of the Compensation and Management Development Committee (the
"Committee") of the Board of Directors of Central Federal Corporation (the
"Company") is to discharge the Board's responsibilities relating to compensation
for the Company's directors and officers. The Committee has overall
responsibility for approving and evaluating the director and officer
compensation plans, policies, and programs of the Company. The Committee also is
responsible for producing, in accordance with the rules and regulations of the
Securities and Exchange Commission (the "SEC"), an annual report on executive
compensation for inclusion in the Company's annual proxy statement.
COMMITTEE MEMBERSHIP
The Committee shall consist of three or more members of the Board, each of
whom the Board has determined has no material relationship with the Company and
each of whom is otherwise "independent" under the rules of the National
Association of Securities Dealers, Inc.
The members of the Committee shall be appointed and replaced by the Board
on the recommendation of the Corporate Governance and Nominating Committee.
Members shall serve at the pleasure of the Board and for such term or terms as
the Board may determine.
COMMITTEE STRUCTURE AND OPERATIONS
The Board shall designate one member of the Committee as its Chair. The
Committee shall meet in person or telephonically at least three times a year at
a time and place determined by its Chair, with further meetings to occur, or
actions to be taken by unanimous written consent, when deemed necessary or
desirable by the Committee or its Chair.
The Committee may invite such members of management to its meetings as it
may deem desirable or appropriate, consistent with the maintenance of the
confidentiality of compensation discussions. The Company's Chief Executive
Officer ("CEO") should not be in attendance during any portion of a meeting in
which the CEO's performance or compensation is discussed, unless specifically
invited by the Committee.
COMMITTEE DUTIES AND RESPONSIBILITIES
The Committee shall have the following duties and other responsibilities:
1. Establish, in consultation with senior management, the Company's general
compensation philosophy, and oversee the development and implementation
of compensation programs.
2. Review and approve corporate and individual goals relevant to CEO
compensation, administer the performance evaluation of the CEO by the
Board and recommend to the Board the CEO's compensation level based on
this evaluation. In recommending the long-term incentive component of
the CEO compensation, the Committee shall consider the Company's
performance and relative shareholder return, the value of similar
incentive awards to CEO's at comparable companies and past awards given
to the CEO.
3. Make recommendations to the Board with respect to the Company's
incentive compensation plans and equity based plans, oversee the
activities of the committees responsible for administering these plans
and discharge any responsibilities imposed on the Committee by any of
these plans.
4. Review and approve for the CEO (i) annual base salary level, (ii) annual
incentive opportunity level, (iii) long-term incentive opportunity
level, (iv) employment agreements, severance arrangements, change in
control or similar termination agreements and (v) other special or
supplemental benefits.
5. Prepare and issue the evaluation and reports required under "Committee
Reports" below.
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6. Perform any other duties or responsibilities expressly delegated to the
Committee by the Board from time to time relating to the Company's
compensation programs.
DELEGATION TO SUBCOMMITTEE
The Committee may, in its discretion, delegate all or a portion of its
duties and responsibilities to a subcommittee of the Committee.
COMMITTEE REPORTS
The Committee shall produce the following reports and provide them to the
Board.
1. A summary of the pertinent actions taken at each Committee meeting,
which shall be presented to the Board at the next Board meeting.
2. An annual report of the Committee on executive compensation for
inclusion in the Company's annual proxy statement in accordance with
applicable SEC rules and regulations.
3. An annual performance evaluation of the Committee, which evaluation
shall compare the performance of the Committee with the requirements of
this charter. The performance evaluation shall also recommend to the
Board any improvements to this charter deemed necessary or desirable by
the Committee. The performance evaluation by the Committee shall be
conducted in such manner as the Committee deems appropriate. The report
to the Board may take the form of an oral report by the Chair or any
other member of the Committee designated by the Committee to make this
report.
RESOURCES AND AUTHORITY OF THE COMMITTEE
The Committee shall have resources and authority appropriate to discharge
its duties and responsibilities, including the authority to select, retain,
terminate, and approve the fees and other retention terms of special counsel or
other experts or consultants, as it deems appropriate without seeking approval
of the Board or management. With respect to compensation consultants retained to
assist in the evaluation of director, CEO, or other senior executive
compensation, this authority shall be vested solely in the Committee.
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APPENDIX C
CORPORATE GOVERNANCE AND
NOMINATING COMMITTEE CHARTER
PURPOSE
The purpose of the Corporate Governance and Nominating Committee (the
"Committee") of the Board of Directors (the "Board") of Central Federal
Corporation (the "Company") is to (1) identify and recommend individuals to the
Board for nomination as members of the Board and its committees; (2) develop and
recommend to the Board a set of corporate governance principles applicable to
the Company; and (3) lead the Board in its annual review of the Board's
performance.
COMMITTEE MEMBERSHIP
The Committee shall consist of three or more members of the Board, each of
whom the Board has determined has no material relationship with the Company and
each of whom is otherwise "independent" under the rules of the National
Association of Securities Dealers, Inc.
The members of the Committee shall be appointed and replaced by the Board.
Members shall serve at the pleasure of the Board and for such term, or terms, as
the Board may determine.
COMMITTEE STRUCTURE AND OPERATIONS
The Board shall designate one member of the Committee as its Chair. The
Committee shall meet in person or telephonically at least twice a year at a time
and place determined by the Chair, with further meetings to occur, or actions to
be taken by unanimous written consent, when deemed necessary or desirable by the
Committee or its Chair.
COMMITTEE DUTIES AND RESPONSIBILITIES
The following are the duties and responsibilities of the Committee:
a. Make recommendations to the Board from time to time as to changes the
Committee believes to be desirable to the size of the Board or any
committee thereof.
b. Identify individuals believed to be qualified to become Board members,
and to recommend to the Board the nominees to stand for election as
directors at the annual meeting of stockholders or, if applicable, at a
special meeting of stockholders. In the case of a vacancy in the office
of a director (including a vacancy created by an increase in the size of
the Board), the Committee shall recommend to the Board an individual to
fill such vacancy either through appointment by the Board or through
election by stockholders. In nominating candidates, the Committee shall
take into consideration such factors as it deems appropriate. These
factors may include judgment, skill, diversity, experience with
businesses and other organizations of comparable size, the interplay of
the candidate's experience with the experience of other Board members,
and the extent to which the candidate would be a desirable addition to
the Board and any committees of the Board. The Committee may consider
candidates proposed by management, but is not required to do so.
c. To develop and recommend to the Board standards to be applied in making
determinations as to the absence of material relationships between the
Company and a director.
d. In the case of a director nominee to fill a Board vacancy created by an
increase in the size of the Board, make a recommendation to the Board as
to the class of directors in which the individual should serve.
e. Identify Board members qualified to fill vacancies on any committee of
the Board (including the Committee) and to recommend that the Board
appoint the identified member or members to the respective committee. In
nominating a candidate for committee membership, the Committee shall
take into consideration the factors set forth in the charter of the
committee, if any, as well as any other factors it deems appropriate
including without limitation the consistency of the candidate's
experience with the
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goals of the committee and the interplay of the candidate's experience
with the experience of other committee members.
f. Make reports to the Board on the activities of the Committee.
g. Make a report at least annually to the Board on management succession
planning.
h. Establish procedures for the Committee to exercise oversight of the
evaluation of the Board.
i. Review and reassess the Corporate Governance Guidelines of the Company
and recommend any proposed changes to the Board.
j. Prepare and issue the evaluation required under "Performance Evaluation"
below.
k. Perform any other duties or responsibilities expressly delegated to the
Committee by the Board from time to time relating to the nomination of
Board and committee members.
DELEGATION TO SUBCOMMITTEE
The Committee may, in its discretion, delegate all or a portion of its
duties and responsibilities to a subcommittee of the Committee.
PERFORMANCE EVALUATION
The Committee shall produce and provide to the Board an annual performance
evaluation of the Committee, which evaluation shall compare the performance of
the Committee with the requirements of this charter. The performance evaluation
shall also recommend to the Board any improvements to the Committee's charter
deemed necessary or desirable by the Committee. The performance evaluation by
the Committee shall be conducted in such manner as the Committee deems
appropriate. The report to the Board may take the form of an oral report by the
Chair or any other member of the Committee designated by the Committee to make
the report.
RESOURCES AND AUTHORITY OF THE COMMITTEE
The Committee shall have the resources and authority appropriate to
discharge its duties and responsibilities, including the authority to select,
retain, terminate and approve the fees and other retention terms of special
counsel or other experts or consultants, as it deems appropriate, without
seeking approval of the Board or management. With respect to consultants or
search firms used to identify director candidates, this authority shall be
vested solely in the Committee.
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APPENDIX D
CORPORATE GOVERNANCE GUIDELINES
I. INTRODUCTION
The Board of Directors (the "Board") of Central Federal Corporation, acting
on the recommendation of its Corporate Governance and Nominating Committee, has
adopted these corporate governance principles (the "Guidelines") to promote the
effective functioning of the Board and its committees, to promote the interests
of stockholders, and to ensure a common set of expectations as to how the Board,
its various committees, individual directors and management should perform their
functions.
II. BOARD COMPOSITION AND SIZE
The members of the Board should collectively possess a broad range of
skills, expertise, industry and other knowledge, and business and other
experience useful to the effective oversight of the Company's business. A
majority of the Board shall consist of directors who the Board has determined
are "independent" under the rules of National Association of Securities Dealers,
Inc. (each an "Independent Director").
It is the sense of the Board that, in present circumstances, the Board
should consist of seven members in order to facilitate its functioning. The
Board has the ability to increase or decrease its size under the Bylaws of the
Company and values the flexibility to do so if circumstances change.
III. SELECTION OF CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
The Board shall select its chairman (the "Chairman") and the Company's
chief executive officer (the "CEO") in any way it considers in the best
interests of the Company. The Board has no policy on whether the roles of
Chairman and CEO should be separate or combined and, if they are to be separate,
whether the Chairman should be selected from the independent directors or should
be an employee of the Company.
IV. SELECTION OF DIRECTORS
Nominations and Appointments. The Board's Corporate Governance and
Nominating Committee shall be responsible for identifying and recommending to
the Board qualified candidates for Board membership, based primarily on the
following criteria: (i) judgment, character, expertise, skills and knowledge
useful to the oversight of the Company's business; (ii) diversity of viewpoints,
backgrounds, experiences and other demographics; (iii) business or other
relevant experience; and (iv) the extent to which the interplay of the
candidate's expertise, skills, knowledge and experience with that of other Board
members will build a Board that is effective, collegial and responsive to the
needs of the Company.
The Corporate Governance and Nominating Committee also shall be responsible
for initially assessing whether a candidate would be an Independent Director.
The Board, taking into consideration the recommendations of the Corporate
Governance and Nominating Committee, shall be responsible for selecting the
nominees for election to the Board by the stockholders and for appointing
directors to the Board to fill vacancies, with primary emphasis on the criteria
set forth above. The Board, taking into consideration the assessment of the
Corporate Governance and Nominating Committee, shall also make a determination
as to whether a nominee or appointee would be an Independent Director.
Invitations. The invitation to join the Board shall be extended by the
Board via the Chairman and either the Chair of the Corporate Governance and
Nominating Committee or another independent director of the Company designated
by the Chairman and the Chair of the Corporate Governance and Nominating
Committee.
V. CONTINUATION AS A DIRECTOR
Review of Continuation Based on Age. Upon attaining the age of 70 and
annually thereafter, a director shall tender a letter of proposed retirement
from the Board to the Chair of the Corporate Governance and Nominating
Committee. The Corporate Governance and Nominating Committee shall review the
director's
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continuation on the Board, and recommend to the Board whether, in light of all
the circumstances, the Board should accept such proposed retirement or request
that the director continue to serve.
Resignation of Chairman or CEO. A Chairman or CEO who resigns from that
position shall tender to the Board a letter of proposed resignation from the
Board. The Corporate Governance and Nominating Committee shall review the
director's continuation on the Board, and recommend to the Board whether, in
light of all the circumstances, the Board should accept such proposed
resignation or request that the director continue to serve.
Change In Job Responsibility. When a director's principal occupation or
business association changes substantially from the position he or she held when
originally invited to join the Board, the director shall tender a letter of
proposed resignation from the Board to the Chair of the Corporate Governance and
Nominating Committee. The Corporate Governance and Nominating Committee shall
review the director's continuation on the Board, and recommend to the Board
whether, in light of all the circumstances, the Board should accept such
proposed resignation or request that the director continue to serve.
VI. THE COMMITTEES OF THE BOARD
The Board shall have at least three committees: the Audit Committee, the
Compensation and Management Development Committee and the Corporate Governance
and Nominating Committee (the "Committees"). Each Committee shall have a written
charter. The Board expects to accomplish a substantial amount of its work
through the Committees. Each Committee shall report regularly to the Board
summarizing the Committee's actions and any significant issues considered by the
Committee.
Each of the Audit Committee, the Compensation and Management Development
Committee and the Corporate Governance and Nominating Committee shall be
composed of no fewer than three members. Each Committee member must satisfy the
membership requirements set forth in the relevant Committee charter. A director
may serve on more than one Committee.
The Corporate Governance and Nominating Committee shall be responsible for
identifying Board members qualified to fill vacancies on any Committee and
recommending that the Board appoint the identified member or members to the
applicable Committee. The Board, taking into account the views of the Chairman,
shall designate one member of each Committee as Chair of such Committee. It is
the sense of the Board and the Corporate Governance and Nominating Committee
that consideration should be given to rotating members of the Committees
periodically at about a three year interval, but they do not believe that such a
rotation should be mandated as a policy since there may be reasons at a given
point in time to maintain an individual director's committee membership for a
longer period.
VII. BOARD AND COMMITTEE MEETINGS
The Board shall have at least four meetings each year. Further meetings
shall occur if called by the Board, the Chairman, the Chair of the Corporate
Governance and Nominating Committee, the CEO, the President, the Chief Operating
Officer or any two directors. The Board may act by unanimous written consent in
lieu of a meeting.
Each Committee shall have the number of meetings provided for in its
charter, with further meetings to occur (or action to be taken by unanimous
written consent) when deemed necessary or desirable by the Committee or its
Chair.
The agenda for each Board meeting shall be established by the Chairman. Any
Board member may suggest the inclusion of additional subjects on the agenda. The
agenda for each Committee meeting shall be established by the Committee Chair in
consultation with appropriate members of the Committee and with management.
Although management will seek to provide appropriate materials in advance of
Board and Committee meetings, this will not always be consistent with the timing
of transactions and the operations of the business, and in certain cases it may
not be possible to circulate materials in advance of the meeting. Materials
presented to the Board and Committee members should provide the information
needed for the directors to make an informed judgment or engage in informed
discussion.
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At least annually, the Chairman shall issue to the other Board members a
schedule of the foreseeable primary agenda subjects intended to be discussed by
the Board, and each Committee's Chair shall issue to the other Committee members
a schedule of the foreseeable primary agenda subjects intended to be discussed
by the Committee.
Unless a Committee expressly determines otherwise, the agenda, materials
and minutes for each Committee meeting shall be available to all directors, and
all directors shall be free to attend any Committee meeting. In addition, all
directors, whether or not members of the Committee, shall be free to make
suggestions to a Committee Chair for additions to the agenda of the Committee or
to request that an item from a Committee agenda be considered by the Board.
VIII. EXECUTIVE SESSIONS
To ensure free and open discussion and communication among the
non-management directors, these directors shall meet in executive session at
least twice a year with no members of management present. The Chair of the
Corporate Governance and Nominating Committee shall preside at the executive
sessions, unless the other non-management directors determine otherwise. These
executive sessions shall also constitute meetings of the Corporate Governance
and Nominating Committee, with any non-management directors who are not members
of such Committee attending by invitation.
These executive sessions shall serve as the forum for the annual evaluation
of the performance of the CEO, the annual review of the CEO's plan for
management succession and the annual evaluation of the performance of the Board.
IX. BOARD RESPONSIBILITIES
The business and affairs of the Company are managed by or under the
direction of the Board in accordance with Delaware law. The Board's
responsibility is to provide direction and oversight. The Board establishes the
strategic direction of the Company and oversees the performance of the Company's
business and management. The management of the Company is responsible for
presenting strategic plans to the Board for review and approval and for
implementing the Company's strategic direction. In performing their duties, the
primary responsibility of the directors is to exercise their business judgment
in the best interests of the Company.
Certain specific corporate governance functions of the Board are set forth
below:
Management Succession. The Board, acting through the Corporate
Governance and Nominating Committee, shall review and concur in a
management succession plan, developed by the CEO, to ensure continuity in
senior management. This plan, on which the CEO shall report at least
annually, shall address; (i) emergency CEO succession; (ii) CEO succession
in the ordinary course of business; and (iii) succession for the other
members of senior management. The plan shall include an assessment of
senior management experience, performance, skills and planned career paths.
Evaluating the CEO. The Board, acting through the Corporate
Governance and Nominating Committee, shall annually conduct an evaluation
of the performance of the CEO. The Chair of the Corporate Governance and
Nominating Committee shall communicate such evaluation to the CEO and the
Chair of the Compensation and Management Development Committee.
Director Compensation. The Corporate Governance and Nominating
Committee shall periodically review the form and amounts of director
compensation and make recommendations to the Board with respect thereto.
The Board shall set the form and amounts of director compensation, taking
into account the recommendations of the Corporate Governance and Nominating
Committee. The Board believes that the amount of director compensation
should fairly reflect the contributions of the directors to the performance
of the Company. Management shall at least annually prepare and provide to
the Chair of the Corporate Governance and Nominating Committee a report on
the director compensation policies and practices of the Company's principal
competitors and other comparable companies.
D-3
Reviewing and Approving Significant Transactions. Board approval of a
particular transaction may be appropriate because of several factors,
including (i) legal or regulatory requirements, (ii) the materiality of the
transaction to the Company's financial performance, risk profile or
business, (iii) the terms of the transaction or (iv) other factors, such as
the entering into of a new line of business or a variation from the
Company's strategic plan. To the extent the Board determines it to be
appropriate, the Board shall develop standards to be utilized by management
in determining types of transactions that should be submitted to the Board
for review and approval or notification.
X. EXPECTATIONS FOR DIRECTORS
The Board has developed a number of specific expectations of directors to
promote the discharge by the directors of their responsibilities and to promote
the efficient conduct of the Board's business. It is understood that the
non-management directors are not full-time employees of the Company.
Commitment and Attendance. All directors should make every effort to
attend meetings of the Board and the Committees of which they are members.
Attendance by telephone or video conference may be used to facilitate a
director's attendance.
Participation in Meetings. Each director should be sufficiently familiar
with the business of the Company, including its financial statements and capital
structure, and the risks and the competition it faces, to ensure active and
effective participation in the deliberations of the Board and of each Committee
on which such director serves. Upon request, management shall make appropriate
personnel available to answer any questions a director may have about any aspect
of the Company's business. Directors should also review the materials provided
by management and advisors in advance of the meetings of the Board and its
Committees and should arrive prepared to discuss the issues presented.
Loyalty and Ethics. In their roles as directors, all directors owe a duty
of loyalty to the Company. This duty of loyalty mandates that the best interests
of the Company take precedence over any interest possessed by a director.
The Company has adopted a Code of Business Conduct and Ethics. Certain
portions of the Code deal with activities of directors, particularly with
respect to potential conflicts of interest, the taking of corporate
opportunities for personal use and transactions in the securities of the
Company. Directors should be familiar with the Code's provisions in these areas
and should consult with the Company's General Counsel to discuss any issues that
may arise.
Other Directorships and Significant Activities. The Company values the
experience directors bring from other boards on which they serve and other
activities in which they participate, but recognizes that those boards and
activities also present demands on a director's time and availability and may
present conflicts or legal issues, including independence issues. Directors
should advise the Chair of the Corporate Governance and Nominating Committee
before accepting membership on other boards of directors or any audit committee
or other significant committee assignment on any other board of directors, or
establishing other significant relationships with businesses, institutions,
governmental units or regulatory entities, particularly those that may result in
significant time commitments or a change in the director's relationship to the
Company.
Contact with Management and Employees. All directors shall be free to
contact the CEO at any time to discuss any aspect of the Company's business.
Directors shall also have complete access to other employees of the Company. The
Board expects there will be frequent opportunities for directors to meet with
the CEO and other members of management in Board and Committee meetings, or in
other formal or informal settings.
Further, the Board encourages management to bring into Board meetings from
time to time (or otherwise make available to Board members) individuals who can
provide additional insight into the items being discussed, because of personal
involvement and substantial knowledge in those areas.
Speaking on Behalf of the Company. It is important that the Company speak
to employees and outside constituencies with a single voice and that management
serve as the primary spokesman. If a situation arises in
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which it seems necessary for a non-management director to speak on behalf of the
Company to one of these constituencies, the director should consult with the CEO
before speaking.
Confidentiality. The proceedings and deliberations of the Board and its
Committees shall be confidential. Each director shall maintain the
confidentiality of information received in connection with his or her service as
a director.
XI. EVALUATING BOARD AND COMMITTEE PERFORMANCE
The Board, acting through the Corporate Governance and Nominating
Committee, shall conduct an annual self-evaluation. Each Committee shall conduct
an annual self-evaluation as provided for in its respective charter.
XII. ORIENTATION AND CONTINUING EDUCATION
Management, working with the Board, shall provide an orientation process
for new directors, including background material on the Company and its
business. As appropriate, management shall prepare additional educational
sessions for directors on matters relevant to the Company and its business.
XIII. RELIANCE ON MANAGEMENT AND OUTSIDE ADVICE
In performing its functions, the Board shall be entitled to rely on the
advice, reports and opinions of management, counsel, accountants, auditors and
other expert advisors. Except as otherwise provided in any Committee charter,
the Board shall have the authority to select, retain, terminate and approve the
fees and other retention terms of its outside advisors.
REPORTING OF CONCERNS
The Board adopted Procedures for Reporting Complaints, effective as of
February 20, 2003 and amended as of March 1, 2004, with respect to reporting
concerns regarding accounting controls, auditing matters and other issues (the
"Complaint Procedures"). The Complaint Procedures are designed to provide a
channel of communication for employees and others who have concerns about the
conduct of the Company and its employees. Such concerns may be communicated, in
a confidential or anonymous manner, in accordance with the Complaint Procedures.
The Company strictly prohibits any retaliation for reporting a possible
violation of law, ethics or firm policy, no matter whom the report concerns.
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APPENDIX E
DIRECTOR INDEPENDENCE STANDARDS
The Board of Directors of Central Federal Corporation (the "Company") has
adopted the following Director Independence Standards to assist in determining
the independence of a director.
In order for a director to be considered "independent," the Board must
affirmatively determine that the director has no relationship that would
interfere in the exercise of independent judgment in carrying out the
responsibilities of a director. In each case, the Board will consider all
relevant facts and circumstances, including the director's commercial,
industrial, banking, consulting, legal, accounting, charitable and familial
relationships. The Board also will consider such other criteria as it may from
time to time deem appropriate.
1. A director will not be considered "independent" if the director fails to
qualify as an "independent director" under Rule 4200(a)(15) of the
Nasdaq Stock Market, Inc. In addition, a director will not be
independent if, during the current year or within the preceding three
years: (a) the director was employed by the Company; (b) the director
received, or an immediate family member received, more than $60,000 per
year in payments from the Company, other than compensation (i) for board
or board committee service, (ii) payments arising solely from
investments in the Company's securities, (iii) compensation paid to a
family member who is a non-executive employee of the Company, (iv)
benefits under a tax-qualified retirement plan or non-discretionary
compensation or (v) loans permitted under Section 13(k) of the
Securities Exchange Act of 1934; (c) an immediate family member of the
director was employed by the Company as an executive officer; (d) any
organization, of which the director or an immediate family member is a
partner, executive officer or controlling stockholder, received payments
from the Company in any year exceeding the greater of $200,000 and 5% of
the recipient's consolidated gross revenues for that year, other than
(i) payments arising solely from investments in the Company's securities
or (ii) payments under non-discretionary charitable contribution
matching programs; or (e) any executive officer of the Company served on
the compensation committee of a company which employed the director, or
which employed an immediate family member of the director, as an
executive officer. Finally, a director will not be considered
independent if the director or an immediate family member is a current
partner of the Company's independent auditor or was a partner or
employee of the Company's independent auditor that worked on the
Company's audit at any time during the past three years.
2. In addition to the relationships described in paragraph 1, an Audit
Committee member must not (i) directly or indirectly accept any
consulting, advisory or other compensatory fee from the Company, except
as a director or member of the Audit Committee or (ii) be an affiliated
person of the Company, except as a director or member of any committee.
An Audit Committee member may receive fees in the form of cash, stock,
stock units, stock options or other consideration ordinarily available
to directors, as well as regular benefits that other directors receive.
3. The Board will undertake an annual review of the independence of all
directors. In advance of the meeting at which this review occurs, each
director shall be asked to provide the Board with full information
regarding the director's (including immediate family members') business,
charitable and other relationships with the Company to enable the Board
to evaluate the director's independence.
4. A director has an affirmative obligation to inform the Board of any
material changes in circumstances or relationships that may impact
designation by the Board as "independent". This obligation includes all
business, charitable and other relationships between directors
(including immediate family members) and the Company.
For purposes of these Director Independence Standards, "immediate family
member" includes a person's spouse, parents, children and siblings and anyone
who resides in such person's home, and "Company" includes Central Federal
Corporation and any subsidiary thereof.
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APPENDIX F
AMENDED AND RESTATED
CENTRAL FEDERAL CORPORATION
2003 EQUITY COMPENSATION PLAN
1. DEFINITIONS
(a) "Affiliate" means any "parent corporation" or "subsidiary corporation"
of the Holding Company, as such terms are defined in Sections 424(e)
and 424(f) of the Code.
(b) "Award" means, individually or collectively, a grant under the Plan of
Non-Statutory Stock Options, Incentive Stock Options, Stock
Appreciation Rights and Restricted Stock Awards.
(c) "Bank" means Central Federal Bank.
(d) "Board of Directors" means the board of directors of the Holding
Company.
(e) "Change in Control" means with respect to the Bank or the Holding
Company, an event of a nature that (i) would be required to be reported
in response to Item 1(a) of the current report on Form 8-K, as in
effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"); or (ii) results
in a Change in Control of the Holding Company or the Bank within the
meaning of the Home Owner's Loan Act of 1933, as amended, the Federal
Deposit Insurance Act and the Rules and Regulations promulgated by the
Office of Thrift Supervision ("OTS") (or its predecessor agency), as in
effect on the date hereof (provided, that in applying the definition of
change in control as set forth under the rules and regulations of the
OTS, the Board shall substitute its judgment for that of the OTS); or
(iii) without limitation such a Change in Control shall be deemed to
have occurred at such time as (A) any "person" (as the term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of voting securities of the Bank or the Holding
Company representing 20% or more of the Bank's or the Holding Company's
outstanding voting securities or right to acquire such securities
except for any voting securities of the Bank purchased by the Holding
Company and any voting securities purchased by any employee benefit
plan of the Holding Company or its Subsidiaries, or (B) individuals who
constitute the Board on the date hereof (the "Incumbent Board") cease
for any reason to constitute at least a majority thereof, provided that
any person becoming a director subsequent to the date hereof whose
election was approved by a vote of at least three-quarters of the
directors comprising the Incumbent Board, or whose nomination for
election by the Holding Company's stockholders was approved by a
Nominating Committee solely composed of members who are Incumbent Board
members, shall be, for purposes of this clause (B), considered as
though he were a member of the Incumbent Board, or (C) a plan of
reorganization, merger, consolidation, sale of all or substantially all
the assets of the Bank or the Holding Company or similar transaction
occurs or is effectuated in which the Bank or Holding Company is not
the resulting entity, or (D) a proxy statement has been distributed
soliciting proxies from stockholders of the Holding Company, by someone
other than the current management of the Holding Company, seeking
stockholder approval of a plan of reorganization, merger or
consolidation of the Holding Company or Bank with one or more
corporations as a result of which the outstanding shares of the class
of securities then subject to such plan or transaction are exchanged
for or converted into cash or property or securities not issued by the
Bank or the Holding Company shall be distributed, or (E) a tender offer
is made for 20% or more of the voting securities of the Bank or Holding
Company then outstanding.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Committee" means the committee designated, pursuant to Section 3 of
the Plan, to administer the Plan.
(h) "Common Stock" means the common stock of the Holding Company, par value
$.01 per share.
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(i) "Disability" means any mental or physical condition with respect to
which the Participant qualifies for and receives benefits under a
long-term disability plan of the Holding Company or an Affiliate, or in
the absence of such a long-term disability plan or coverage under such
a plan, "Disability" shall mean a physical or mental condition which,
in the sole discretion of the Committee, is reasonably expected to be
of indefinite duration and to substantially prevent the Participant
from fulfilling his duties or responsibilities to the Holding Company
or an Affiliate.
(j) "Effective Date" means April 23, 2003.
(k) "Employee" means any person employed by the Holding Company or an
Affiliate. Directors who are also employed by the Holding Company or an
Affiliate shall be considered Employees under the Plan.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(m) "Exercise Price" means the price at which an individual may purchase a
share of Common Stock pursuant to an Option.
(n) "Fair Market Value" means the market price of Common Stock, determined
by the Committee as follows:
(i) If the Common Stock was traded on the date in question on the
Nasdaq Stock Market, then the Fair Market Value shall be equal to
the closing price reported for such date;
(ii) If the Common Stock was traded on a stock exchange for the date in
question, then the Fair Market Value shall be equal to the closing
price reported by the applicable composite transactions report for
such date; and
(iii) If neither of the foregoing provisions is applicable, then the
Fair Market Value shall be determined by the Committee in good
faith on such basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the
Committee shall be based on the prices reported in The Wall Street
Journal. The Committee's determination of Fair Market Value shall be
conclusive and binding on all persons.
(o) "Holding Company" means Central Federal Corporation (formerly Grand
Central Financial Corp.) and any entity which succeeds to the business
of Central Federal Corporation.
(p) "Incentive Stock Option" means a stock option granted under the Plan,
that is intended to meet the requirements of Section 422 of the Code.
(q) "Non-Statutory Stock Option" means a stock option granted to an
individual under the Plan that is not intended to be and is not
identified as an Incentive Stock Option, or a stock option granted
under the Plan that is intended to be and is identified as an Incentive
Stock Option, but that does not meet the requirements of Section 422 of
the Code.
(r) "Option" means an Incentive Stock Option or a Non-Statutory Stock
Option.
(s) "Outside Director" means a member of the board(s) of directors of the
Holding Company or an Affiliate who is not also an Employee of the
Holding Company or an Affiliate.
(t) "Participant" means any Employee or Outside Director who was granted an
Option or Restricted Stock Award under the Plan.
(u) "Plan" means this Amended and Restated Central Federal Corporation 2003
Equity Compensation Plan.
(v) "Restricted Stock Award" means an Award of restricted stock granted to
an individual pursuant to Section 7 of the Plan.
(w) "Retirement" means retirement from employment with the Holding Company
or an Affiliate in accordance with the then current retirement policies
of the Holding Company or Affiliate, as applicable. "Retirement" with
respect to an Outside Director means the termination of service from
the board(s) of
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directors of the Holding Company and any Affiliate following written
notice to such board(s) of directors of the Outside Director's
intention to retire.
(x) "Stock Appreciation Right" or "SAR" means a right to a payment provided
in accordance with Section 7 of the Plan.
(y) "Termination for Cause" shall mean, in the case of an Outside Director,
removal from the board(s) of directors of the Holding Company and its
Affiliates in accordance with the applicable by-laws of the Holding
Company and its Affiliates or, in the case of an Employee, as defined
under any employment agreement with the Holding Company or an
Affiliate; provided, however, that if no employment agreement exists
with respect to the Employee, Termination for Cause shall mean
termination of employment because of a material loss to the Holding
Company or an Affiliate, as determined by and in the sole discretion of
the Board of Directors or its designee(s).
2. PURPOSE
The purpose of this Plan is to: (a) provide the Holding Company with the
ability to continue using Common Stock as a means to attract and retain
Employees and Outside Directors; (b) provide Participants with additional
incentives to continue to work for the success of the Holding Company and its
Affiliates; and (c) align the financial interests of Participants with the
interests of the Holding Company's shareholders.
3. ELIGIBILITY
(a) Incentive Stock Options may be granted to any individual who, at the
time the Incentive Stock Option is granted, is an Employee of the
Holding Company or an Affiliate.
(b) Non-Qualified Stock Options may be granted to Employees and Outside
Directors.
(c) Stock Appreciation Rights may be granted to Employees and Outside
Directors.
(d) Restricted Stock Awards may be granted to Employees and Outside
Directors.
4. ADMINISTRATION
(a) The Committee shall administer the Plan. The Committee shall consist of
the entire Board of Directors of the Company.
(b) The Committee shall:
(i) select the individuals who are to receive grants of Awards under
the Plan;
(ii) determine the type, number, vesting requirements and other
features and conditions of such Awards made under the Plan;
(iii) interpret the Plan and Award Agreements (as defined below); and
(iv) make all other decisions related to the operation of the Plan.
In granting Awards under the Plan, the Committee shall consider
recommendations of the Chief Executive Officer. The Committee shall
adopt any rules or guidelines that it deems appropriate to implement
and administer the Plan. The Committee's determinations under the Plan
shall be final and binding on all persons.
(c) Each Award granted under the Plan shall be evidenced by a written
agreement ("Award Agreement"). Each Award Agreement shall constitute a
binding contract between the Holding Company or an Affiliate and the
Award holder, and every Award holder, upon acceptance of an Award
Agreement, shall be bound by the terms and restrictions of the Plan and
the Award Agreement. The terms of each Award Agreement shall be set in
accordance with the Plan, but each Award Agreement may also include any
additional
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provisions and restrictions determined by the Committee. In particular,
and at a minimum, the Committee shall set forth in each Award
Agreement:
(i) the type of Award granted;
(ii) the Exercise Price of any Option or base price of any SAR;
(iii) the number of shares subject to the Award;
(iv) the expiration date of the Award;
(v) the manner, time and rate (cumulative or otherwise) of exercise or
vesting of the Award; and
(vi) the restrictions, if any, placed on the Award, or upon shares which
may be issued upon the exercise or vesting of the Award.
The Chairman of the Committee and such other directors and employees as
shall be designated by the Committee are hereby authorized to execute
Award Agreements on behalf of the Holding Company or an Affiliate and
to cause them to be delivered to the recipients of Awards granted under
the Plan.
(d) The Committee may delegate all authority for the determination of forms
of payment to be made or received by the Plan and for the execution of
any Award Agreement. The Committee may rely on the descriptions,
representations, reports and estimates provided to it by the management
of the Holding Company or an Affiliate for determinations to be made
pursuant to the Plan.
5. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 13 of the Plan, the number of
shares reserved for issuance under the Plan is 200,000. The share reserve
includes shares of Common Stock previously issued under the Plan prior to the
Plan's restatement. The following limits also apply with respect to Awards
granted under the Plan:
(a) The maximum number of shares of Common Stock that may be delivered
pursuant to Incentive Stock Options granted under the Plan is 200,000
shares.
(b) The maximum number of shares of Common Stock that may be delivered
pursuant to Non-Statutory Stock Options granted under the Plan is
200,000 shares.
(c) The maximum number of Shares of Common Stock that may be delivered
pursuant to Restricted Stock Awards granted under the Plan is 60,000
Shares.
The shares of Common Stock issued under the Plan may be either authorized
but unissued shares or authorized shares previously issued and acquired or
reacquired by the Holding Company. Shares underlying outstanding Awards will be
unavailable for any other use, including future grants under the Plan, except
that, to the extent the Awards terminate, expire or are forfeited without
vesting or having been exercised, new Awards may be granted with respect to
these shares subject to the limitations set forth in this Section 5.
To the extent that an Award is settled in cash or a form other than shares
of Common Stock, the shares that would have been delivered had there been no
such cash or other settlement shall not be counted against the shares available
for issuance under this Plan. Shares of Common Stock that are exchanged by a
Participant or withheld by the Holding Company as full or partial payment in
connection with any Award under this Plan, as well as any shares exchanged by a
Participant or withheld by the Holding Company to satisfy the tax withholding
obligations related to any Award under this Plan, shall be available for
subsequent Awards under this Plan.
6. OPTIONS
The Committee may, subject to the limitations of this Plan and the
availability of shares of Common Stock reserved but not previously awarded under
the Plan, grant Options to Employees and outside directors, subject to
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terms and conditions as it may determine, to the extent that such terms and
conditions are consistent with the following provisions:
(a) Exercise Price. The Exercise Price shall not be less than one hundred
percent (100%) of the Fair Market Value of the Common Stock on the date
of grant.
(b) Terms of Options. In no event may an individual exercise an Option, in
whole or in part, more than ten (10) years from the date of grant.
(c) Non-Transferability. Unless otherwise determined by the Committee in
accordance with this Section 5(c), an individual may not transfer,
assign, hypothecate, or dispose of an Option in any manner, other than
by will or the laws of intestate succession. The Committee may,
however, in its sole discretion, permit transfer or assignment of a
Non-Statutory Stock Option, if it determines that the transfer or
assignment is for valid estate planning purposes and is permitted under
the Code and Rule 16b-3 of the Exchange Act. For purposes of this
Section 6(c), a transfer for valid estate planning purposes includes,
but is not limited to, transfers:
(i) to a revocable inter vivos trust, as to which an individual is both
settlor and trustee; or
(ii) for no consideration to: (1) any member of the individual's
Immediate Family; (2) a trust solely for the benefit of members
of the individual's Immediate Family; (3) any partnership whose
only partners are members of the individual's Immediate Family;
or (4) any limited liability corporation or other corporate
entity whose only members or equity owners are members of the
individual's Immediate Family.
For purposes of this Section 6(c), "Immediate Family" includes, but is
not necessarily limited to, an individual's parents, grandparents,
spouse, children, grandchildren, siblings (including half brothers and
sisters), and individuals who are family members by adoption. Nothing
contained in this Section 6(c) shall be construed to require the
Committee to approve the transfer or assignment of any Non-Statutory
Stock Option, in whole or in part. Receipt of the Committee's approval
to transfer or assign a Non-Statutory Stock Option, in whole or in
part, does not mean that the Committee must approve a transfer or
assignment of any other Non-Statutory Stock Option, or portion thereof.
The transferee or assignee of any Non-Statutory Stock Option shall be
subject to all terms and conditions applicable to the Option
immediately prior to transfer or assignment, and shall remain subject
to any other conditions proscribed by the Committee with respect to the
Option.
(d) Special Rules for Incentive Stock Options. Notwithstanding foregoing
provisions, the following rules apply to the grant of Incentive Stock
Options:
(i) If an Employee owns or is treated as owning, for purposes of
Section 422 of the Code, Common Stock representing more than ten
percent (10%) of the total combined voting securities of the
Holding Company at the time the Committee grants the Incentive
Stock Option (a "10% Owner"), the Exercise Price shall not be less
than one hundred and ten percent (110%) of the Fair Market Value of
the Common Stock on the date of grant.
(ii) An Incentive Stock Option granted to a 10% Owner shall not be
exercisable more than five (5) years from the date of grant.
(iii) To the extent the aggregate Fair Market Value of shares of Common
Stock with respect to which Incentive Stock Options are
exercisable for the first time by an Employee during any calendar
year, under the Plan or any other stock option plan of the Holding
Company, exceeds $100,000, or such higher value as may be
permitted under Section 422 of the Code, Options in excess of the
limit shall be treated as Non-Statutory Stock Options. Fair Market
Value shall be determined as of the date of grant for each
Incentive Stock Option.
(iv) Each Award Agreement for an Incentive Stock Option shall require
the individual to notify the Committee within ten (10) days of any
disposition of shares of Common Stock under the
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circumstances described in Section 421(b) of the Code (relating to certain
disqualifying dispositions).
(v) Incentive Stock Options exercised more than three (3) months
following the date an Employee terminates employment (for reasons
other than death or Disability) will be treated as Non-Statutory
Stock Options. In the event employment is terminated due to death
or Disability, Incentive Stock Options will remain exercisable for
one (1) year from the date the Employee terminates employment.
(e) Acceleration Upon a Change in Control. Upon a Change in Control, all
Options held by an individual as of the date of the Change in Control
shall immediately become exercisable and shall remain exercisable until
the expiration of the Option term.
(f) Termination of Employment or Service. The following rules apply upon
the termination of a Participant's employment or other service:
(i) In General. Unless the Committee determines otherwise, upon
termination of employment or service for any reason other than
Retirement, Disability or death, or Termination for Cause, a
Participant may exercise only those Options that were immediately
exercisable by the Participant at the date of termination, and only
for a period of three (3) months from the date of termination, or,
if sooner, until the expiration of the Option term.
(ii) Retirement. Unless the Committee determines otherwise, upon a
Participant's Retirement, the Participant may exercise only those
Options that were immediately exercisable by the Participant at
the date of Retirement, and only for a period of one (1) year from
the date of Retirement, or, if sooner, until the expiration of the
Option term. Incentive Stock Options exercised more than three (3)
months following a Participant's Retirement date will be treated
as Non-Statutory Stock Options for tax purposes.
(iii) Disability or Death. Unless the Committee determines otherwise,
upon termination of a Participant's employment or service due to
Disability or death, all Options shall become immediately
exercisable and shall remain exercisable for a period of one (1)
year from the date of termination, or, if sooner, until the
expiration of the Option term.
(iv) Termination for Cause. Unless the Committee determines otherwise,
upon Termination for Cause, all rights to a Participant's Options
shall expire immediately upon the effective date of Termination
for Cause.
7. STOCK APPRECIATION RIGHTS
An SAR shall provide a Participant with the right to receive a payment, in
cash and/or Common Stock, equal to the excess of the Fair Market Value of a
specified number of shares of Common Stock on the date the SAR is exercised over
the Fair Market Value of a share of Common Stock on the date the SAR was granted
(the "base price") as set forth in the applicable Award Agreement, provided,
however, that, in the case of an SAR granted retroactively, in tandem with or as
a substitution for another Award, the base price may be no lower than the Fair
Market Value of a share of Common Stock on the date such other Award was
granted. The maximum term of an SAR shall be ten (10) years.
(a) Termination of Employment or Service. The following rules apply upon
the termination of a Participant's employment or other service:
(i) In General. Unless the Committee determines otherwise, upon
termination of employment or service for any reason other than
Retirement, Disability or death, or Termination for Cause, a
Participant may exercise only those SARs that were immediately
exercisable by the Participant at the date of termination, and only
for a period of three (3) months from the date of termination, or,
if sooner, until the expiration of the SAR term.
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(ii) Retirement. Unless the Committee determines otherwise, upon a
Participant's Retirement, the Participant may exercise only those
SARs that were immediately exercisable by the Participant at the
date of Retirement, and only for a period of one (1) year from the
date of Retirement, or, if sooner, until the expiration of the SAR
term.
(iii) Disability or Death. Unless the Committee determines otherwise,
upon termination of a Participant's employment or service due to
Disability or death, all SARs shall become immediately exercisable
and shall remain exercisable for a period of one (1) year from the
date of termination, or, if sooner, until the expiration of the
SAR term.
(iv) Termination for Cause. Unless the Committee determines otherwise,
upon Termination for Cause, all rights to a Participant's SARs
shall expire immediately upon the effective date of Termination for
Cause.
(b) Acceleration Upon a Change in Control. Upon a Change in Control, all
SARs held by an individual as of the date of the Change in Control
shall immediately become exercisable and shall remain exercisable until
the expiration of the SAR term.
8. RESTRICTED STOCK AWARDS
The Committee may make grants of Restricted Stock Awards, which shall
consist of the grant of some number of shares of Common Stock to an individual
upon such terms and conditions as it may determine to the extent such terms and
conditions are consistent with the following provisions:
(a) Grants of Stock. Restricted Stock Awards may only be granted in whole
shares of Common Stock.
(b) Non-Transferability. Except to the extent permitted by the Code, the
rules promulgated under Section 16(b) of the Exchange Act or any
successor statutes or rules:
(i) The recipient of a Restricted Stock Award grant shall not sell,
transfer, assign, pledge, or otherwise encumber shares subject to
the grant until full vesting of such shares has occurred. For
purposes of this section, the separation of beneficial ownership
and legal title through the use of any "swap" transaction is deemed
to be a prohibited encumbrance.
(ii) Unless determined otherwise by the Committee and except in the
event of the Participant's death or pursuant to a domestic
relations order, a Restricted Stock Award grant is not
transferable and may be earned in his or her lifetime only by the
individual to whom it is granted. Upon the death of a Participant,
a Restricted Stock Award grant is transferable by will or the laws
of descent and distribution. The designation of a beneficiary
shall not constitute a transfer.
(iii) If the recipient of a Restricted Stock Award is subject to the
provisions of Section 16 of the Exchange Act, shares of Common
Stock subject to the grant may not, without the written consent of
the Committee (which consent may be given in the Award Agreement),
be sold or otherwise disposed of within six (6) months following
the date of grant.
(c) Acceleration of Vesting Upon a Change in Control. Upon a Change in
Control, all Restricted Stock Awards held by a Participant as of the
date of the Change in Control shall immediately become vested and any
further restrictions shall lapse.
(d) Termination of Employment or Service. The following rules will govern
the treatment of a Restricted Stock Award upon the termination of a
Participant's termination of employment or other service:
(i) In General. Unless the Committee determines otherwise, upon the
termination of a Participant's employment or service for any reason
other than Retirement, Disability or death, or Termination for
Cause, any Restricted Stock Award in which the Participant has not
become vested as of the date of such termination shall be forfeited
and any rights the Participant had to such Restricted Stock Award
shall become null and void.
F-7
(ii) Retirement. Unless the Committee determines otherwise, upon a
Participant's Retirement, any Restricted Stock Award in which the
Participant has not become vested as of the date of Retirement
shall be forfeited and any rights the individual had to such
unvested Restricted Stock Award shall become null and void.
(iii) Disability or Death. Unless otherwise determined by the
Committee, in the event of a termination of a Participant's
service due to Disability or death, all unvested Restricted Stock
Awards held by such Participant shall immediately vest as of the
date of such termination.
(iv) Termination for Cause. Unless otherwise determined by the
Committee, in the event of a Participant's Termination for Cause,
all Restricted Stock Awards in which the Participant had not
become vested as of the effective date of such termination shall
be forfeited and any rights the Participant had to such unvested
Restricted Stock Awards shall become null and void.
(e) Issuance of Certificates. Unless otherwise held in trust and
registered in the name of the Plan trustee, reasonably promptly after
the date of grant with respect to shares of Common Stock pursuant to a
Restricted Stock Award, the Holding Company shall cause to be issued a
stock certificate, registered in the name of the Participant to whom
the Restricted Stock Award was granted, evidencing such shares;
provided, that the Holding Company shall not cause a stock certificate
to be issued unless it has received a stock power duly endorsed in
blank with respect to such shares. Each such stock certificate shall
bear the following legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and
conditions (including forfeiture provisions and restrictions
against transfer) contained in the Amended and Restated Central
Federal Corporation 2003 Equity Compensation Plan entered into
between the registered owner of such shares and Central Federal
Corporation or its Affiliates. A copy of the Plan and Award
Agreement is on file in the office of the Corporate Secretary of
Central Federal Corporation, 2841 Riviera Drive, Suite 300,
Fairlawn, Ohio 44333-3413."
This legend shall not be removed until the individual becomes vested in
such shares pursuant to the terms of the Plan and Award Agreement. Each
certificate issued pursuant to this Section 7(e) shall be held by the
Holding Company or its Affiliates, unless the Committee determines
otherwise.
(f) Treatment of Dividends. Participants are entitled to all dividends and
other distributions declared and paid on Common Stock with respect to
all shares of Common Stock subject to a Restricted Stock Award, from
and after the date such shares are awarded or from and after such later
date as may be specified by the Committee in the Award Agreement. The
Participant shall not be required to return any such dividends or other
distributions to the Holding Company in the event of forfeiture of the
Restricted Stock Award. In the event the Committee establishes a trust
for the Plan, the Committee may elect to distribute dividends and other
distributions at the time the Restricted Stock Award vests or pay the
dividends (or other distributions) directly to the Participants.
(g) Voting of Restricted Stock Awards. Participants who are granted
Restricted Stock Awards are entitled to vote or to direct the Plan
trustee to vote, as the case may be, all unvested shares of Common
Stock subject to the Restricted Stock Award.
9. DEFERRED PAYMENTS
The Committee, in its discretion, may permit an individual to elect to
defer the receipt of all or any part of any cash or stock payment under the
Plan, or the Committee may determine to defer receipt by some or all
individuals, of all or a portion of any payment. The Committee shall determine
the terms and conditions of any permitted deferral, including the period of
deferral, the manner of deferral and the method used to measure appreciation on
deferred amounts until paid.
F-8
10. METHOD OF EXERCISING OPTIONS
Subject to any applicable Award Agreement, an individual may exercise any
Option, in whole or in part, at such time or times as the Committee specifies in
the Award Agreement. The individual may make payment of the Exercise Price in
such form or forms as the Committee specifies in the Award Agreement, including,
without limitation, payment by delivery of cash, Common Stock or a cashless
exercise with a qualified broker. Any Common Stock used in full or partial
payment of the Exercise Price shall be valued at the Fair Market Value of the
Common Stock on the date of exercise. Delivery by the Holding Company of the
shares as to which an Option has been exercised shall be made to the person
exercising the Option or the designee of such person. If so provided by the
Committee upon grant of the Option, the shares received upon exercise may be
subject to certain restrictions upon subsequent transfer or sale by the
Participant. In the event the Exercise Price is to be paid in full or in part by
surrender of Common Stock, in lieu of actual surrender of shares of Common Stock
the Holding Company may waive such surrender and instead deliver to or on behalf
of the Participant a number of shares equal to the total number of shares as to
which the Option is then being exercised less the number of shares which would
otherwise have been surrendered by the Participant to the Holding Company.
11. RIGHTS OF INDIVIDUALS
No individual shall have any rights as a shareholder with respect to any
shares of Common Stock covered by a grant under this Plan until the date of
issuance of a stock certificate for such Common Stock. Nothing contained in this
Plan or in any Award Agreement confers on any person the right to continue in
the employ or service of the Holding Company or an Affiliate or interferes in
any way with the right of the Holding Company or an Affiliate to terminate an
individual's services.
12. DESIGNATION OF BENEFICIARY
With the Committee's consent, an individual may designate a person or
persons to receive, upon the individual's death, any Award to which the
individual would then be entitled. This designation shall be made upon forms
supplied by and delivered to the Holding Company and it may be revoked in
writing. If an individual fails to effectively designate a beneficiary, the
individual's estate shall be deemed to be the beneficiary for purposes of the
Plan.
13. DILUTION AND OTHER ADJUSTMENTS
In the event of any change in the outstanding shares of Common Stock, by
reason of any stock dividend or split, recapitalization, merger, consolidation,
spin-off, reorganization, combination or exchange of shares, or other similar
corporate change, or any other increase or decrease in such shares, without
receipt or payment of consideration by the Holding Company, or in the event an
extraordinary capital distribution is made, the Committee may make adjustments
to previously granted Awards, to prevent dilution, diminution, or enlargement of
the rights of individuals, including any or all of the following:
(a) adjustments in the aggregate number or kind of shares of Common Stock
or other securities that may underlie future Awards under the Plan;
(b) adjustments in the aggregate number or kind of shares of Common Stock
or other securities that underlie Awards already made under the Plan;
and
(c) adjustments in the Exercise Price of outstanding Options or base price
of outstanding SARs.
The Committee, however, shall not make adjustments that materially change
the value of benefits available to an individual under a previously granted
Award. All Awards under this Plan shall be binding upon any successors or
assigns of the Holding Company.
F-9
14. TAXES
Under this Plan, whenever cash or shares of Common Stock are to be
delivered, the Committee is entitled to require as a condition of delivery that:
(i) the individual remit an amount sufficient to satisfy all related
federal, state, and local withholding tax requirements;
(ii) the withholding of such sums may come from compensation otherwise due
to the individual or from shares of Common Stock due to the
individual under this Plan; or
(iii) any combination of (i) and (ii), above; provided, however, that no
amount shall be withheld from any cash payment or shares of Common
Stock related to an Option transferred by the individual in
accordance with this Plan.
15. NOTIFICATION UNDER SECTION 83(B)
The Committee may, on the date of grant or at a later date, prohibit an
individual from making the election described below. If the Committee has not
prohibited an individual from making this election, and the individual shall, in
connection with the exercise of any Award, make the election permitted under
Section 83(b) of the Code, the individual shall notify the Committee of the
election within ten (10) days of filing notice of the election with the Internal
Revenue Service. This requirement is in addition to any filing and notification
required under the regulations issued under the authority of Section 83(b) of
the Code.
16. AMENDMENT OF THE PLAN AND AWARD GRANTS
(a) Except as provided in paragraph (c) of this Section 16, the Board of
Directors may at any time, and from time to time, modify or amend the
Plan in any respect, prospectively or retroactively; provided, however,
that provisions governing grants of Incentive Stock Options shall be
submitted for shareholder approval to the extent required by law,
regulation, or otherwise. Failure to ratify or approve amendments or
modifications by shareholders shall be effective only as to the
specific amendment or modification requiring shareholder ratification
or approval. Other provisions of this Plan shall remain in full force
and effect. No termination, modification, or amendment of this Plan may
adversely affect the rights of an individual under an outstanding Award
without the written permission of the affected individual.
(b) Except as provided in paragraph (c) of this Section 16, the Committee
may amend any Award Agreement, prospectively or retroactively;
provided, however, that no amendment shall adversely affect the rights
of an individual under an outstanding Award Agreement without the
written consent of the affected individual.
(c) In no event shall the Board of Directors, without shareholder approval,
amend the Plan or shall the Committee amend an Award Agreement in any
manner that effectively:
(i) allows any Option to be granted with an Exercise Price below the
Fair Market Value of the Common Stock on the date of grant; or
(ii) allows the Exercise Price of any Option previously granted under
the Plan to be reduced after the date of grant.
17. TERMINATION OF THE PLAN
The right to grant Awards under the Plan will terminate upon the earlier
of: (i) April 23, 2013, ten (10) years after the Effective Date; or (ii) the
issuance of a number of shares of Common Stock pursuant to the exercise of
Options and Stock Appreciation Rights and the vesting of Restricted Stock Awards
equal to the maximum number of shares reserved under the Plan, as set forth in
Section 5. The Board of Directors may suspend or terminate the Plan at any time;
provided, however, that no such action will adversely affect an individual's
vested rights under a previously granted Award, without the consent of the
affected individual.
18. APPLICABLE LAW
The Plan will be administered in accordance with the laws of the state of
Delaware, except to the extent that Federal law is deemed to apply.
F-10
CENTRAL FEDERAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
APRIL 20, 2004
10:00 A.M. LOCAL TIME
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints the official proxy committee of the Board of
Directors of Central Federal Corporation (the "Company"), each with full power
of substitution, to act as proxy for the undersigned, and to vote all shares of
common stock of the Company which the undersigned is entitled to vote only at
the Annual Meeting of Shareholders, to be held at the Central Federal Bank
Fairlawn office located at 2923 Smith Road, Fairlawn, Ohio on Tuesday, April 20,
2004 at 10:00 a.m., local time, and at any and all adjournments thereof, with
all of the powers the undersigned would possess if personally present at such
Meeting as follows:
(1) The election as directors of all nominees listed (except as marked to the
contrary below).
Thomas P. Ash
David C. Vernon
Jerry F. Whitmer
Mark S. Allio
William R. Downing
FOR VOTE WITHHELD FOR ALL EXCEPT
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
INSTRUCTION: TO WITHHOLD YOUR VOTE FOR ANY INDIVIDUAL NOMINEE, MARK "FOR ALL
EXCEPT" AND WRITE THAT NOMINEE'S NAME ON THE LINE PROVIDED BELOW.
-------------------------------------------------------------------------------
(2) Approval of the Amended and Restated Central Federal Corporation 2003 Equity
Compensation Plan.
FOR AGAINST ABSTAIN
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
(3) The ratification of the appointment of Crowe Chizek and Company LLC as
independent auditors of the Company for the year ending December 31, 2004.
FOR AGAINST ABSTAIN
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
THIS PROXY IS REVOCABLE AND WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS
ARE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" EACH OF THE PROPOSALS LISTED. IF
ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING, INCLUDING WHETHER OR NOT
TO ADJOURN THE MEETING, THIS PROXY WILL BE VOTED BY THE PROXIES IN THEIR BEST
JUDGEMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER
BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING.
The undersigned acknowledges receipt from the Company prior to the execution of
this proxy of a Notice of Annual Meeting of Shareholders and of a Proxy
Statement dated March 15, 2004 and of the Annual Report to Shareholders.
Please sign exactly as you name appears on this card. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title. If
shares are held jointly, each holder may sign but only one signature is
required.
Dated:
-----------------------
-------------------------------------------
SIGNATURE OF SHAREHOLDER
-------------------------------------------
SIGNATURE OF SHAREHOLDER
PLEASE COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS PROXY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE
(Central Federal Corporation Letterhead)
Dear Central Federal Bank Employees' Savings & Profit Sharing Plan and Trust
Participant:
On behalf of the Board of Directors, I am forwarding you the attached Vote
Authorization Form for the purpose of conveying your voting instructions to
Pentegra (the "Trustee") on the proposals to be presented at the Annual Meeting
of Shareholders of Central Federal Corporation (the "Company") on April 20,
2004. Also enclosed is a Notice and Proxy Statement for the Company's Annual
Meeting of Shareholders and a copy of the Company's Annual Report to
Shareholders.
As a participant in the Central Federal Bank Employees' Savings & Profit
Sharing Plan and Trust, you are entitled to direct the Trustee on how to vote
the shares of Company common stock in your account as of February 27, 2004, the
Annual Meeting record date. These shares will be voted as directed by you
provided your instructions are received by the Trustee by April 13, 2004. The
Trustee, subject to its fiduciary duties, will vote any shares of Company common
stock for which no instructions are provided in a manner calculated to most
accurately reflect the instructions the Trustee has received from participants
regarding the shares of Company common stock allocated to their 401(k) accounts.
In order to direct the voting of shares of Company common stock in your
account, please complete and sign the enclosed Vote Authorization Form and
return it in the enclosed postage-paid envelope no later than April 13, 2004.
Your vote will not be revealed, directly or indirectly, to any employee or
director of the Company or Bank.
Sincerely,
David C. Vernon
Chairman, President and Chief Executive Officer
VOTE AUTHORIZATION FORM
I understand that Pentegra, (the "Trustee"), is the holder of record and
custodian of all shares of Central Federal Corporation common stock allocated to
me under the Central Federal Bank Employees' Savings & Profit Sharing Plan and
Trust. Further, I understand that my voting instructions are solicited on behalf
of the Company's Board of Directors for the Annual Meeting of Shareholders to be
held on April 20, 2004.
Accordingly, vote my shares as follows:
(1) The election as directors of all nominees listed (except as marked to the
contrary below).
Thomas P. Ash
David C. Vernon
Jerry F. Whitmer
Mark S. Allio
William R. Downing
FOR VOTE WITHHELD FOR ALL EXCEPT
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
INSTRUCTION: TO WITHHOLD YOUR VOTE FOR ANY INDIVIDUAL NOMINEE, MARK "FOR ALL
EXCEPT" AND WRITE THAT NOMINEE'S NAME ON THE LINE PROVIDED BELOW.
-------------------------------------------------------------------------------
(2) Approval of the Amended and Restated Central Federal Corporation 2003 Equity
Compensation Plan.
FOR AGAINST ABSTAIN
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
(3) The ratification of the appointment of Crowe Chizek and Company LLC as
independent auditors of the Company for the year ending December 31, 2004.
FOR AGAINST ABSTAIN
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS
The Trustee is hereby authorized to vote all shares in my account in its trust
capacity as indicated above.
-------------------- -----------------------------------
Date Signature
Please date, sign and mail this form in the enclosed postage-paid envelope no
later than April 13, 2004.
(Central Federal Corporation Letterhead)
Dear Stock Award Recipient:
On behalf of the Board of Directors, I am forwarding you the Attached Vote
Authorization Form for the purpose of conveying your voting instruction to First
Banker's Trust (the "Trustee") on the proposals to be presented at the Annual
Meeting of Shareholders of Central Federal Corporation (the "Company") on April
20, 2004. Also enclosed is Notice and Proxy Statement for the Company's Annual
Meeting of Shareholders and a copy of the Company's Annual Report to
Shareholders.
As a participant in the Central Federal Corporation 1999 Stock-Based Incentive
Plan (the "Incentive Plan") you are entitled to vote all unvested shares of
restricted stock awarded to you under the Incentive Plan as of February 27,
2004. The Incentive Plan Trustee will vote those shares of the Company stock in
accordance with instructions it receives from you and the other Stock Award
recipients. Shares of restricted stock for which instructions are not received
by April 13, 2004, will not be voted by the Incentive Plan Trustee, as directed
by the Company.
At this time, in order to direct the voting of Company common stock awarded to
you under the Incentive Plan, you must complete and sign the enclosed Vote
Authorization Form and return it in the accompanying postage-paid envelope no
later than April 13, 2003.
Sincerely,
David C. Vernon
Chairman, President and Chief Executive Officer
Name INCENTIVE PLAN
------------------------------------
Shares
----------------------------------
VOTE AUTHORIZATION FORM
I understand that First Banker's Trust (the "Trustee"), is the holder of
record and custodian of all shares of Central Federal Corporation (the
"Company") common stock held in trust for the Central Federal Corporation 1999
Stock-Based Incentive Plan (Incentive Plan). Further, I understand that my
voting instructions are solicited on behalf of the Company's Board of Directors
for the Annual Meeting of Shareholders to be held on April 20, 2004.
Accordingly, I vote my shares as follows:
(1) The election as directors of all nominees listed (except as marked to
the contrary below).
Thomas P. Ash
David C. Vernon
Jerry F. Whitmer
Mark S. Allio
William R. Downing
FOR VOTE WITHHELD FOR ALL EXCEPT
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
INSTRUCTION: TO WITHHOLD YOUR VOTE FOR ANY INDIVIDUAL NOMINEE, MARK "FOR
ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME ON THE LINE PROVIDED BELOW.
-------------------------------------------------------------------------------
(2) Approval of the Amended and Restated Central Federal Corporation 2003
Equity Compensation Plan.
FOR AGAINST ABSTAIN
---------------------------------------- -------------------------------------- --------------------------------------
-------------------------------------------------------------------------------------------------------------------
(3) The ratification of the appointment of Crowe Chizek and Company LLC as
independent auditors of the Company for the year ending December 31, 2004.
FOR AGAINST ABSTAIN
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
The Incentive Plan Trustee is hereby authorized to vote all unvested shares
of Company common stock awarded to me under the Incentive Plan in its trust
capacity as indicated above.
----------------------- --------------------------
Date Signature
Please date, sign and mail this form in the enclosed postage-paid envelope no
later than April 13, 2004.